Selling inherited house

[Cancermummy]

I'm looking for some advice and can't seem to find anything on this situation.

Me and my sister inherited our grandparents shared ownership house 4 years ago. We both got 25%. My sister was still living at our parents with no interest in moving out and no job (so wouldn't have been able to afford rent payments). It was agreed I would live there and when I eventually sold it she would get what it was evaluated at in the will.

The time has come for me to look at selling the place. My sister is still living at our parents with no job so is unable be able to take over the place. We have put a lot of improvements into the house over the years including a fully functioning garden office. My sister now wants 50% of what we sell for despite originally agreeing to only have 50% of its value at the time of our inheritance.

Does anyone have an idea on what a reasonable amount would be for her to get? Or any idea where we stand legally? To give an idea on price our 25% of the house was originally worth £32,500. I'm not sure what its worth now.

Any help or pointing in the right direction would be appreciated. Thank you.

She is entitled to 50% of whatever it sells for now.

Her share was always a percentage, not a stipulated amount.

Unless she agreed otherwise in writing, formalised and witnessed, her original entitlement stands.

Exactly this. To me it feels fair for the OP to be reimbursed for the cost of any significant improvements she's made to the property before splitting the remainder of the sale profit, but as you say, that's a moral judgment, not a legal one. The OP simply needs to re-read the last deceased grand-parent's Will and look at the Title Deeds, which should answer her question (and if she feels she needs any interpretation of what's written in these documents, then get a fixed-fee appointment with a solicitor). It would be so much better to understand her and her sister's legal rights before starting a discussion about it.

The sister may also be liable for Capital Gains Tax as the property is not her primary residence - we held on to MIL’s house after she died as it had a sitting tenant (MIL had been in assisted living for the last few years) and when we sold it 3 years later had a CGT bill to settle as it had increased in value since probate and was not our primary residence.

As it’s expected that Labour will change rules around CGT in their forthcoming budget you might want to get the house on the market asap.

OPs house is £130,000
You said garden office is approx. £9k
You say it adds 8.4%

8.4% of £130k = £10,920

So new value is £140,920 which bare in mind many people will chance offering under on in a buyers market.

Its a sunk cost improvement, theres no real value added over the cost of the item. A lot of improvement fall into that category... they may improve salability but they do not add 'added' value.

Its literally insane squabbling over £2,500 pound in a house sale.

Regarding your second paragraph. "On average it will cost around £9,000 to build a garden office but can add an average of 8.4% to the value of your home." Source: The Property Centre. This is one of many sources from an internet search which show that, post-pandemic and the move towards home working, garden offices absolutely do add value to a house. If OP's/sister's property is worth, say, £200k, that's a potential increase of £16.8k. That said, half of this potential increase would go to the company that owns 50% of the property, so OP and her sister would only benefit to the tune of £8.4k which makes your comment that OP has "possibly overspent" on the home office true. However, this is all conjecture since these figures are national averages and we don't know what the property was worth four years ago when they inherited it, what it's worth now, or what OP spent on the garden office.

That’s true it’s just guesswork but if you only own 25% of a property then any work done to the property would have to increase the property value by 200-400% (depending on split with sister) of the improvement cost. I find that unlikely unless they are builders and did the work themselves. Surely you’d just buy a cheaper property and stick your own garden room in if that’s what you fancied?

I don't say this at all - I gave the source for the quote I used, but many other sources on the internet say the same thing, which you could easily find if you bothered to look.
Also, you've missed four years worth of inflation increases from your calculation, so the house wouldn't be worth just £140,920 now, given that the average house price increases over the last four years have been:
12 months to Sept 2021 - 10.3%
12 months to Sept 2022 - 8.5%
12 months to Sept 2023 - (1.9%)
12 months to Sept 2024 - 2.2%
This would mean the property would now be worth around £156,000, so they wouldn't be "squabbling" over £2.5k.
In any case, they shouldn't be "squabbling" over anything because if the last deceased grand-parent's Will simply states that each sister is bequeathed 25% - and it says nothing more than that - it could reasonably be inferred that once the asset is liquidated (whenever that is) each gets 25% of their 50% of the sale proceeds minus costs. Which is why I advised OP to get a fixed-fee solicitor appointment to understand her and her sister's rights before having a conversation with her sister about it. It then becomes a negotiation (hopefully not a "squabble") based on each of their perspectives of what "fair" looks like.

It's simple. You paid the rent on the place and you lived in the place.
She did not but then she didn't get any benefit from waiting to get her share of the money.

Property has gone up in value from a) overall increase in property values and b) your investment in the property.

You need to deduct the investment you have put in and what is left is split between you.

It's very odd that you think you should benefit from the increase in value over time but she shouldn't.

Why do you think this?

4 years of inflation? on what planet, the prices have mostly gone down. We are in a market crash with increase mortgage rates.

The OP says she paid all bills. That's council tax, water, insurance, contents, internet, gas, electric. Surely that more than covers her rent contributions?

Her sister was living like mum and dad were still picking up all the overheads.

Just giving her 25% of what it was worth back then is definitely unreasonable. That would mean that you had enjoyed years of benefit and subsudised housing at her expense.

At a very minimum she should get the value of what it was worth at the time of inheritance plus 5% year-on-year compounded interest.

So for example 5 years ago the house was worth £130,000 and owned 50% by the Housing Association, 25% by you and 25% by your sister. You have enjoyed 100% of the benefits of that for 4 years.

If you had done no work beyond basic maintenance the property would be worth around £158,000. If your sister just got 25% of that (£39,500) then you have still profited at her expense but at least she has got some return. This figure is similar to what she would have in the bank if it had been sold 4 years ago and the money put in a high interest account.

Properly you should add to this a reasonabke rent for having enjoyed her property for 4 years. That would be easy to calculate as it would be half of what you have been paying in rent to the Housing Association.

The unknown factor is how much the improvements you have done have increased the value of the property. Ot might be that giving her 25% of the current value is broadly equivalent to what she'd have if you'd been paying her rent, or it might be that you would still have profited from her massively if she only gets 25% so you need a valuation but I think its quite likely that she's being very kind to you in asking for only 25% of its current value.

Are you not listening the OP paid all bills. Council tax, water, electric, gas, insurances, TV licence, internet, plus the improvements.

I'm guessing your husband pays all these bills and you have no idea how much it costs. Well at a conservative estimate it's 6k

Just don't be mean.

You're dicking your not well off sister being tight.

Tight? Paying all the bills really?

The sister has gone from bank of mum and dad to bank of sister.

Which isn't her fault I suppose if parents and siblings have enabled it

Your sister has to be very careful about her tax position. Unless you sorted this all out at the time with you being registered as sole owner and her having a charge over the house for the value at the time of private or some such then the taxman is surely going to charge her cgt on her 25% share of the value uplift, whatever you and she might have decided. The whole scheme sounds very poorly thought through - did either of you have legal advice at the time?

Who actually owns the house now. Did the executor(s) of the estate transfer the property into both your names and show that you each own 25%.

If that happened then legally she still owns 25% of the house and that is the share she should get on sale of the property.

I hope you are not trying to take advantage of her. Is she vulnerable in any way? You haven't said what her age is or why she lives with her parents.

Op would of had to pay the bills regardless of where she was living surely? Property would of been sold and cash released unless it was uninhabitable which doesn’t seem to be the case. If you just stuck £35k in an account 4 years ago earning 3% interest you’d have over 39k today. Obviously tax to pay but she could have had an ISA etc My point is the sister has lost out on a potential return on the money by leaving it in the property. She clearly had an expectation that she would share in any gain of property value which seems fair to me.

But those bills wouldn't have existed if the house had just been sold at the outset and the sister given her share. Those bills were the OP's responsibility as she chose to live in the property.

She's entitled to 25pc of current value and it would be fair of her to net off 50pc of the cost of major improvements assuming those added value to the property. Bills, low level maintenance eg boiler service, painting etc don't count.
So if property worth 400k and you spent 10k for the added room then she gets 100k less 5k costs for the room. She should also pay half the selling costs too.

Come off it! You have kept her out of her money that she could have had invested in shares or even a high interest deposit account so that you could have a home.

BE FAIR to her whatever she agreed. This should totally be the agreed % of the sale price not the value at inheritance and you are really morally bankrupt to not agree otherwise. It's your sister! And it's a windfall for both of you.

Nasty.

@Cancermummy mistake was to not cut and run four years ago. Her sister was unemployed and living with parents then. She's still unemployed.

Frankly she's a limpet which her parents have enabled. OP has been caught up in this mess.

A solicitor and accountants will have to sort out this mess.

Ten to one the noodle like parents will leave their house to this poor little unemployed sister

I would agree with this.

It doesn't matter who agrees with what, the ONLY thing that matters is the sisters LEGAL entitlement.

Who owns the 50% of the SO? Are you allowed/ able to sell?

Your sister is legally correct. You need to pay her 25%.