Property dispute - advice/comments appreciated

[Red Kite]

Good morning, all

As a result of an inheritance, I own a one-third share of a flat together with my uncle and aunt (they are siblings).

The property is rented out and I have received my share of the rent up to and including March 2012. It is managed by a letting agency but my aunt deals with everything else.

I had no contact with her (other than receiving an annual cheque in the post) until she sent me a text message in September 2013 saying she wanted to buy my share of the flat, her brother had agreed to sell his share and could she call me to discuss.

She rang me the same day and only at this point did she tell me that the flat needed doing up and that the kitchen and bathroom had been refurbed in May 2013. She also said that she had the flat valued at £250k BEFORE the refurb and that I could sell my share for £83.3k

I said I woul need to think about whether or not I wanted to sell and we would talk again. I also reminded her that I hadn't received my share of the rent for 2011/12 or 2012/13.

I received a cheque for the rent for 2011/12 a few days later.

I wasn't keen to sell so left it until she contacted me about three weeks later. I then told her that I didn't really want to sell and she said that she'd have to ask me for one-third of the refurb costs which she now tells me is £20.4k in total ie my share would £6.8k

I said that I understand but that she would have to send me details of the costs and rent charged pre and post-refurb. and that I would give the sale idea more thought. I also asked to see a copy of the valuation but she said she didn't have anything.

She sent me the numbers but no breakdown of the refurb costs - just the total.

In December, I did some research on Zoopla and found a very similar property in the same street valued at £317k, with a slightly lower rental income estimate.

I contacted her and said I was concerned about the valuation. Her response was that it was impossible to compare because her valuation was done in prior to the refurb

I phoned her and said that she can't expect to purchase a property in December at a retrospective value and that I may as well pay my share of the refurb costs and sell at today's price and why on earth didn't she tell me that she was going to spend £20k on a refurb?

In the end she said "because my brother told me not to".

The choice they've given me is either sell at the £250k value, which apparently he has agreed to (I would add that he is a wealthy man so he's possibly not too worried about losing £10k); or pay one third of the refurb costs NOW and lose the opportunity to sell in the future.

She has also threatened me verbally with solicitors (for why, I don't know) and also charging me for her time for project-managing the refurb

Any comments would be most welcome. Thank you in advance

[wales01man]

Re: Property dispute - advice/comments appreciated

Think you need an independent valuation A full break down of refurb costs to base your decision on you may have to consult a Solicitor.
It all does not add up correctly IMO

[Red Kite]

Re: Property dispute - advice/comments appreciated

Thanks wales01

I think I will consult a solicitor - I guess I'm looking for some food for thought on here.

My aunt would say a current valuation is irrelevant - she is not giving me the option to sell at its current value

[wales01man]

Re: Property dispute - advice/comments appreciated

If you don't want to sell your share you could hold out for a better price.

Sounds like a possible stitch up by the siblings?

[Red Kite]

Re: Property dispute - advice/comments appreciated

It does feel like that.

They have said I have the option to sell at 1/3 of £250k or pay 1/3 of the refurb costs and recieve my share of the rent but will not then be given the option to sell in the future

[meellis]

Re: Property dispute - advice/comments appreciated

Even though it all sounds a bit sus to me it really depends on how you and your family, in particular your aunt, get on. It was definitely unfair them doing a refurb without consulting you on the costs involved and the figures they are quoting makes me feel the flat is in quite an affluent area. What you really need to ask yourself is whether you are getting upset because you feel you are getting fleeced or whether you have any intentions for the flat itself. Do you really want the hassle involved and the bad feelings that go with it, especially when it sounds as though they could probably afford legal bills more than you, or would you be better off just trying for a better valuation and taking the money. Remember that the flat will always require maintenance and they sound as though they can best afford it and will probably take it out of the rental income due to you whereas you could re-invest the money received and hopefully achieve a better return.

[Red Kite]

Re: Property dispute - advice/comments appreciated

meelis - in an ideal world I would hang on to my share with a view to selling some time in the future.

However, given the circumstances, I would sell but not at a price based on a valuation conducted last April. Also, I have no documentation supporting this valution. I did ask to see it but she said she didn't have it

[leclerc]

Re: Property dispute - advice/comments appreciated

I have one question, did she discuss the refurbishment with you prior to spending the money? If not then she did not obtain your consent to have it done.

Furthermore, would the years rental income for 2012/13 cover the cost of the refurbishment?

If the answer is yes then she already has part of the rental income. If for example the rental income was £800 per month then that is 9600 divided by 3 which equals 3200 so that means you owe £3600.

Furthermore, you can say to her that you would be prepared to sell your part of the house AFTER refurbishment once you have seen 3 evaluations and that the average of all three would be divided in 3 so that you would get a fair price of what the house is worth now since no consent was asked before work was carried out.

[Red Kite]

Re: Property dispute - advice/comments appreciated

I have one question, did she discuss the refurbishment with you prior to spending the money? If not then she did not obtain your consent to have it done.

Furthermore, would the years rental income for 2012/13 cover the cost of the refurbishment?

If the answer is yes then she already has part of the rental income. If for example the rental income was £800 per month then that is 9600 divided by 3 which equals 3200 so that means you owe £3600.

Furthermore, you can say to her that you would be prepared to sell your part of the house AFTER refurbishment once you have seen 3 evaluations and that the average of all three would be divided in 3 so that you would get a fair price of what the house is worth now since no consent was asked before work was carried out.

I had absolutely no idea about the refurb (done in May) until she told me in September.

I told her that I might as well pay my share of the refurb costs and sell at today's value but she refuses to give me that option.

My share of the refurb costs is £6.4k My share of the rent for April 2012 - March 2013 is approximately £2.4k

[leclerc]

Re: Property dispute - advice/comments appreciated

So therefore then you owe her £4200 and simply say to her that after taking legal advice that you are asking for the bills for the refurbishment so that you can verify for yourself that the amount is correct.

Can you afford £4200 in one hit?(I'm not prying into your finances but simply asking the question?

If she is not prepared to pay current market value then she should have done the valuation last year and then she could have had an answer on that amount last year. She chose to make the refurbishments which now mean that the value of the property or rather your share of it is worth more that the £90.1k(ie valuation plus refurb costs). That would mean that the valuation now would have to be £270.3k which clearly from your research shows is not the case. I would check that the rental income is a market value as well. If you own the house then clearly you should know how much rent is being taken from the agency. Most agencies tend to take a cut of 10% of total rental income plus VAT.

[meellis]

Re: Property dispute - advice/comments appreciated

All fair advice and I do feel your Aunt is after a bargain and sounds as though she is in a financial position to push it. All I have to say is you need to be sure in your own mind to the possible fallout and costs involved in legal wrangles and then calculate them against the possible gains by holding out. Because you are a part owner anyway couldn't you commission your own valuation I can't see how anybody apart from maybe the tenant can deny you access. Then talk about a true valuation and be honest amongst yourselves about the various motives involved. Remember that families sometimes have a funny way of taking sides when these things happen so it is best try to sort things without legal threats, even though they have already started. I personally can't see anything but resentment from now on whichever way it ends up so just make sure you are totally happy with your decision so your Aunt is able to wallow in their own guilt about what she has done and remember that keeping a share will always keep that resentment there.

[CleverClogs]

Re: Property dispute - advice/comments appreciated

She has also threatened me verbally with solicitors (for why, I don't know) and also charging me for her time for project-managing the refurb

Any comments would be most welcome.

When was she released from the local nut house?

Might she have escaped instead?

[PlanB]

Re: Property dispute - advice/comments appreciated

As a result of an inheritance, I own a one-third share of a flat together with my uncle and aunt (they are siblings).

The property is rented out and I have received my share of the rent up to and including March 2012. It is managed by a letting agency but my aunt deals with everything else.

I had no contact with her (other than receiving an annual cheque in the post) until she sent me a text message in September 2013 saying she wanted to buy my share of the flat, her brother had agreed to sell his share and could she call me to discuss.

. . . . I said I would need to think about whether or not I wanted to sell and we would talk again.

Take your time. This is strictly business even though it involves family members. You've both got the maths wrong.

No one has factored in the Capital Gains Tax bill which will be massive since none of you live in the property. The CGT will be based on the difference between the valuation of the property on the day you inherited it (that should be in the probate papers somewhere) and the price it is eventually sold for. The money spent on improving the property (last May) will be offset against the CGT bill which will have to be paid from the sale proceeds. If the property is owned by three individuals each can use there own CGT annual allowance limit (about £10k each) to minimise the damage to HMRC. There is no escaping CGT.

You cannot claim the cost of renovations (installing/upgrading bathroom/kitchen) against the rental income for tax purposes. You can only deduct the maintenance costs (plus agents' cost etc.) of a property. You each need to declare the rental income to HMRC and pay tax on it minus your annual allowance if that hasn't already been used up.

If Aunty wants to charge for her services then she'll have to produce an invoice and her services will be paid for out of the rental income and offset against tax. She will of course have to pay tax on any income she receives for her services.

If Aunty piles on the pressure then introduce the "HMRC" word into the conversation. That'll soon make her focus

[PlanB]

Re: Property dispute - advice/comments appreciated

The property is rented out and I have received my share of the rent up to and including March 2012. It is managed by a letting agency but my aunt deals with everything else.

If the flat is managed by a letting agent then write to that agent and ask (demand ) to see the rental account statements since the beginning of time. Enclose proof of your ownership such as a copy of the Land Registry title.

If the property is "managed" by the agent then those statements will include all maintenance jobs which have been carried out by the agent's contractors and any other deductions. You will also see what periods the property has been let and where the voids have been (while she was busy updating the flat) with no rent coming in.

You need to see the books not Auntie's version of events.

Having said that she may not be up to no good, she may just not be savvy when it comes to property. Don't judge her just yet. Make it look like your helping and co-operating and taking on your share of the burden of all this That way you may avoid any arguments and solicitors.

[Red Kite]

Re: Property dispute - advice/comments appreciated

thank you Plan B.

I don't know who the letting agents are so I would have to get that info from my aunt.

I think the property was worth about £180k at the time of inhertance, so based on a current valuation, let's say £310k, the difference £130k

On that basis, am I right in saying my CGT liability would be calculated on a CG of about £36k? (130/3 - 20.4/3)