Buying out jointly owned property - Query?

[MAT525]

Hi,
My sister and myself jointly bought a house 10 years ago. She now wants to exit the mortgage and buy her own property. I wish to stay and am willing and can afford to take on her share. Essentially, I am happy to buy her out. We have agreed an amount to be paid based on an average of 3 house valuations taken from 3 local estate agents in the area and the equity gained. Will formally have to do a transfer of equity. Did not want to put the property on the market as I would like to continue living there.

The only issue is that: For 8 years, we both paid the mortgage equally, however for the last 2 years, she was not living in the house and was paying less towards the mortgage.
(trying my best to explain – say just for e.g. mortgage was £1000 a month, for 8 years we both paid equally £500 each. However last 2 years she paid £300 towards the mortgage rather than £500, and I paid £700).

Given that in the last 2 years I paid more on the mortgage. Not sure what can be done. Anyone had a similar situation or any suggestions from anyone with expertise in property matters as to how to approach this in a situation like this?

Thanks.

Couple of thoughts OP.
With regard to the mortgage payments I would suggest that you treat them on a pro-rata basis unless you agreed anything else at the time.
So for example if the monthly mortgage payment was £1000 of which £700 was capital and £300 then you should treat her lower mortgage payments as 70:30 capital to interest. You probably need a spreadsheet to do the maths and work out her current equity.
I would also suggest tax advice if you haven't already taken it.
She is potentially liable for capital gains tax within 60 days of completion as she hasn't lived there for the last 2 years and you have a potential SDLT liability.

www.gov.uk/guidance/sdlt-transferring-ownership-of-land-or-property#if-you-transfer-or-divide-up-jointly-owned-property-or-land-unmarried-couples-and-other-joint-owners

www.gov.uk/tax-sell-property

Yes but she was paying less because she wasn’t living there - there was no benefit to her

It doesn’t matter what she actually paid, if you bought as joint tenants then it’s 50/50, and actually if she wasn’t in the property then you really should have been paying 100% (your 50% and her 50% as occupational rent), you had the benefit of exclusive use of the property.

This is less of a legal issue and more of a relationship one IMO.

Honestly I just wouldn't sweat it. You paid a bit more for a couple of years but then presumably got the use of the whole house as she wasn't living there and it's just two years out of a decade.

Families and money are tricky beasts, so I wouldn't be risking making things awkward over it. Sometimes it's better just to let this stuff go and if you've got all the financials arranged already, I'd just be zen about it.

It comes down to how much do you value the potential of a bit of extra money in your pocket v your relationship with your sister.

But if she's the kind of person that wouldn't mind, then just suggest you pay her a couple of grand less or whatever it works out as to cover it.

You owe her rent for the 2 years she didn't live there is my first thought.

I would assume you could work it out: (obviously using a made up figure of monthly mortgage £1k pm).

2 years mortgage payments = £24k.
Of which is interest = £15k.
Of which is paying down equity = £9k.

So during those 2 years:
You pay the £15k plus half of the £9k = £19.5k = £812.50pm
Sister pays half the equity = £4.5k =£187.50 pm

Are you paying all the stamp duty/fees etc as you should.

You should both get your own Solictors and pay your own costs for that.

You both jointly own the property. Any equity should be split 50:50 unless you agree otherwise.

yes she contributed less to the repayments for a bit. But you got to live there for less than it would have cost you to rent or own your own place. Call it quits and give her the 50% she is legally entitled to.

I imagine the OPs point is that she's paid more and therefore is entitled to more. However the replies haven't gone that way! I guess she won't be back to reply to any of your responses!