DH wants to sell house significantly below market value

[MrsLyndi]

My DH and I are 59 and 61 respectively. We have one child, she is 29.
My DHs parents passed away 10 or so years ago. About 10 years before this they gifted us their 5 bedroom house in a lovely part of London. They wanted to move back to where they had grown up having inherited his mother’s aunts home, but weren’t ready to see the house go as they raised DH and his late sister there.
DH has been renting the house out ever since, it’s been a nice earner for us as it is mortgage free. We live in rurally a few hours from London and had no intention of moving back so it made the most sense.

About 8/9 years ago we took a risk and allowed some fresh uni grads to move in. They made an impression at the time and we haven’t regretted it. They were lovely tenants. They slowly started moving out and now it’s one of the originals and his fiancé.
They are 27/30, incredibly good tenants (the house is gorgeous, we’ve allowed them to decorate as they wish. They are never late with rent, and just lovely people.
DH goes down to London once a month, he likes to sort the garden out himself and enjoys seeing the couple. He has gotten to know them. They are both from the north, one of them had a rough childhood, was in the care system etc. They are now both very successful, make good money etc.
DH was down at the weekend to do a last clear of the garden before winter. As per he got chatting to the couple, they gave an invite for their wedding next year. They also mentioned that they are starting to look at buying somewhere, joked they wish they could afford the house but it would be way out of budget etc. (We’ve been charging below market rate rent for a while now as we don’t need the income, and they are hassle free tenants who let DH potter in the garden).
They told DH they wouldn’t be looking at more than 1mil or so.
The house is probably worth about 1.5mil now potentially a little more(5 bedrooms, good sized garden, drive way, well decorated, in the catchment area for a fantastic primary, near one of Londons big parks and good transport links!).
DH has been thinking of selling the house for a few years and decided when they eventually moved out that he would sell it. He wants to give our daughter a gift that will pay off her mortgage (less than £500,000). Then use the rest of the money to enjoy our retirement. We have good pensions so that is not a concern.
Now DH has a crazy idea … he wants to sell them the house for what they can afford, around the £950,000-1mil mark, so significantly less than what it is worth!!!

His reasonings are

• The girl reminds him of his mother, he’s always said this. Very cheery, fun person
• One of them has overcome all sorts to get to where they are
• He knows they will look after the house, they are planning to have a family etc.
• “It feels like the right thing to do”

In DHs mind, we don’t need the money, even selling for significantly less, we can take care of our daughter and have a nice retirement.

I’m more on the fence. While they seem like lovely people, what if in 5 years they sell and run off with the £500,000+ profit. How does this work with a mortgage and such? We don’t know them all that well but would be essentially giving them half a million pounds!!!!
DH is a very kind and loving man but often too kind!
AIBU to think this is a crazy idea and wonder how it’s even possible?!

How am I 'denying this couple's privilege'?

We haven't been told that they have inherited anything. We have been told that one of them is a care leaver which makes it much less likely.

Even if they have had help from parents (which we don't know either way and from the OP seems to me not to be the case), it pales in comparison to the privilege that OP has.

This is a young couple in the UK in 2023, trying to make their way in a very expensive housing market that is frankly broken. However hard they work, they will not have the money that OP and her husband have. That is inherently unfair and this gesture evens that up slightly.

I say good for OP's husband, what a generous man, and she is lucky to be married to someone so kind.

Are you even really allowed to sell a property for under its worth? I remember the MP Ian Gibson had to resign as he had done this for a family member?
I thought it was fraud or something.

Giving a nice couple cheap rent because you like them and they look after the place well is a commendable act of altruism. Giving them £500k+ (and I can't believe the house is only worth £1.5m) is ridiculous.

Unfortunately, if you sold this house for significantly under its market value, you will likely find it on Rightmove in a few months time.

This couple may be great tenants and nice people but they are not objects of pity. They can afford to pay the rent on a 5 bedroom house in London. Why do a couple even need a 5 bedroom house?? If they have come from a care or underprivileged background and now make a lot of money, then they are likely also savvy, opportunistic and hard headed. This will be their opportunity to make a lot of free money and they will take it, why wouldn't they?

I wouldn't even sell this house. Houses like this are like gold-dust and it should stay in your family. Does your own DD not want to live there?

They probably let him in 'his' garden still as they get cheap rent. If they bought it they might want to change the garden to their own style, they might ask him to stop coming. They might just decide to sell and grab the extra £500k to make their own life decisions. They certainly don't sound like they need charity. He can't keep his connection, set up your grand daughter instead.

Can’t you find some other way to structure the deal so that they can stay in the house but have to pay full market value? E.g loan them the difference between their max mortgage with it payable in the future? Eg 10 years with minimal interest? They could remortgage then or sell up and pay off the loan with the proceeds to you or your daughter or grandchildren? They might be earning more then so could afford the extra part.

I’m with your husband.

Your family has massively benefited from the house, which was essentially a gift.

He is massively fond of the couple, indeed she feels like family to him. Emotionally I imagine it feels less of a loss, but also it sounds as if he is thinking about the family that will have a life there.

Yes the couple are wealthy, compared to others, but it also sounds they have worked jolly hard, and overcome some obstacles on the way. Are we really going to have a “fuck them, for being better off!”attitude? Where would that end? It isn’t a race to the bottom? Or is it?

Your daughter isn’t losing out, she will be mortgage free. You will have money for retirement. They will have a family home. If they make a profit, if they sell, if they split, if, if, if… yes, you may have an uncomfortable reaction, resentment, jealousy, etc. but do your potential negative feelings negate the really lovely, ones your DH has? It sounds as if this idea and potential act is really nourishing for him.

I think it is a lovely idea - I am sure that some sort of legal clause (covenant?) could be written into the sale (I have no legal background, but have definitely heard of similar) ensuring that if the property is resold, you get a share of the profit, if it has increased in real terms above the purchase price. It may be worth investigating, as this could give you peace of mind that your generosity couldn't be abused in the future.

I'd be surprised if 5bed and a decent garden and all the apwca liated in London is 'only' £1.5m

It's a lovely thing for him to want to do but no I wouldn't, in essence, give my tenants hundreds of thousands of pounds.

Maybe as a kind gesture he could let them live rent free for a period of time to help with their deposit.

But I'd want that profit from the house benefiting my family.

Also I suspect that a house worth that much will be 'looked after' anyway.

Op says his sister has died.

Question, I have no idea if this is possible but could the DH sell the home to these tenants as a shared ownership for now and they can pay rent on the remaining percentage with room to buy remaining share over time?

Anyone who could afford a £1m property, even in London, does NOT need help. It would be obscene. As others have said, if he wants to do a generous thing it would have much more impact to donate the extra money to a charity who could support many people instead of just one couple who (I'll say it again) DON'T NEED HELP!

It's a lovely gesture. As long as your daughter is supporting it, I'd go ahead. Without estate agents etc the fees will be lower for you.
People in England tend to see every property as an investment, and greed has definitely played a part in the current housing situation, particularly in London. Houses are homes for people to live in, you don't HAVE to try to make tones of money with it.

And they probably can't "afford" a 1 million pound house, they don't have a choice because that's what a 2-3 bed house with minimum garden cost. We had to leave London when we both work there and all our support network is there, because despite the banks willing to lend us the money we thought it was unreasonable to borrow that much.

I’d get it valued first. Then decide what difference it would make not using estate agents etc. Also if the couple can afford it. Your husband definitely has an emotional attachment and sounds lovely, you are more realistic. Donating some money to children in care is a fab idea. If he wants to go that route.

Could there be tax implications? I think you'll have to pay capitol gains on it - it might raise questions as to why it was sold under value?

Madness!

They have a budget of 1mil for first time buyers

Sell the house for its full value and donate the £500k to someone more in need

What part of London OP, roughly?

Don’t forget if you would be liable to pay capital gains tax, given it’s been rented out. Also, when HMRC do compliance checks they request valuations of the house. If they find you have sold below market value, you may find yourself in hot water.

Now, I would be prepared to give existing tenants a discount. Among other things, it would save me a great deal of hassle in finding a buyer, and they know all the issues with the house.

But a third of the value, no, that's far too much.

It’s interesting that I’ve just been reading a thread about tax avoidance in the wealthy vs benefits fraud. Everyone seemed to be of the opinion that tax avoidance is bad, benefits fraud is insignificant. Here, lots of people are saying that the husband is doing a good thing helping a young couple get on the housing ladder. However, both parties could be seen to be evading paying tax.
The OPs DH could be seen as avoiding paying CGT if he sold the house £500k below market value, and the buyers would avoid paying stamp duty on £500k if they bought below market value.

Stamp duty on £1m is about £40k, on £1.5m is about £90k.
CGT on a £1.5m property is around £200k, on a £1m property is around £75k

That’s a clear cut case of tax fraud.

Just no

Honestly my friends are high earners but none can afford a £1m property. These two don't need help.

@MrsLyndi my best friends are currently schmoozing with neighbours so they don't object to planning permission. My friends are lovely people. My point is these tenants may not be so lovely and will probably sell on quickly for a profit. Anyone would!

THIS!!!!

OP and her DH will likely owe HMRC up to £140k (the £500k undervalue @28%) tax on money they never had.

We will probably sell slightly under top market value to our neighbours who want to live next door to their children (Bangladeshis).

I don't see what's wrong with it. Life isn't all about money.