Tenants in common - selling on share?

[Churchillian]

I own a house with a friend as a 'tenant in common'. I used to live there (he still does, income from a lodger pays my share of the mortgage) but moved out a couple of years ago to live with my partner. I now want to sell my share of the house, to buy a place with my partner and a relative of my friend has proposed that they buy me out.

Anyone been in a similar situation i.e selling on a percentage of a property whilst the other partner did not? (We were not romantically involved at any point, just friends who couldn't afford to buy separately, so all completely amicable. ) How did you agree on a price for your share? What did you do re valuations? Was it complicated legally? What were the implications re the mortgage? What are the tax implications - I would use the proceeds of my sale as equity for a new property, so am hoping to avoid Capital Gains Tax.

I have no special knowledge but am curious to know how it would work.

I know that you can get an "independent valuation" of a property which is different from the wildly optimistic overpricing you get from estate agents and the depressingly pessimistic value a surveyor gives the bank for mortgage purposes. Some friends of mine had to arrange for this service when they were selling a shared ownership home - I think there was a fee similar to a mortgage valuation fee. You need to agree before the valuation whether you are just going to go with that number whatever it may be, or whether you'll use it to inform and advise negotiations.

Is the existing mortgage currently in a tie-in period? I very much doubt you can just swap the names of mortgagees and have the lender consider it the same account. I expect your friend and the new sharer will have to apply for a new mortgage together, and the old mortgage will get entirely paid off and they'll start afresh. Any penalty fees will have to come out of your equity.

No idea about CGT. The property clearly isn't your primary residence so I suspect you'll be liable, but there may be a lucky exemption if it was previously your primary residence and you've been renting since. Pretty sure there won't be any stamp duty unless the value of your half is over the threshold.

Thanks Fish - Do you know who did the 'independent valuation' for your friends? A surveyor?

No mortgage tie-in luckily and yes it was my main place of residence for many years.

You don't want any valuation of your half share to be discounted precisely because it's only a half share. You'll want to sell it for half the value of the whole property sold with vacant possession. You'll need the cooperation of the other owner to transfer your half, but if you want your money out you could always sell the whole. If the other owner won't agree you can get a court order requiring sale.

We are doing this at the moment. MIL and FIL divorced some years ago, but retained the marital home as tenants in common. Sadly MIL died at the end of last year, and the portion of the house that belonged to MIL was left to dh and dbil. FIL doesn't want to buy them out, so the house is being sold.

They have got three valuations, and will pick the one they are all happy with, for the sale price.

We have not got to selling the house yet, so can't tell you whether the Estate agent will need a copy of the tenancy in common paperwork and/or any other documents (maybe a signed letter of consent from the other tenant in common).

You could either go to an independent valuation company - look for an RICS residential valuer - or you could maybe just go to three high street estate agents and get an average value - but really you need to know the value it would transact at (not the marketing value). As PP said - you need to make sure they are valuing it based on vacant possession.

With regards to capital gains tax it is likely you will need to pay some capital gains tax for the proportion of the period that you let it out. So if you owned it for 10 years and lived in it for 6 and rented out your half for 4 years then for 4 of those 10 years you would be liable for the gain (ie 40% of the gain would be taxable). However it's not that bad because for a start the last 18 months of ownership is classed as if you were living in it whether you were or not (so in this example you would only be liable for 2.5 years out of the 10 yrs - or 25%). And there are other things you can offset for the gain too - fees, any capital improvements to the property.

I think also that the gain in the first 3 years after you moved out is also exempt.

Thanks everyone-lots to think about.

You cannot technically sell a % share in a property so any change would have to be a Transfer of the whole title by the existing registered owners to the new ones.
As there is a mortgage involved the mortgage lender will have to be involved, will have to consent (most lenders have a restriction registered on the title as part of the mortgage process) and they will most likely also insist that those involved use a conveyancer to complete the process on your behalf.

In the circumstances I would recommend contacting the lender first to check whether they will agree to the Transfer and if they do what their requirements are.