The Lemon Fool

*** I don't follow why he would do this, rather than look at the net equity in the property.

Read on McDuff!

John

redsturgeon wrote:

*** I don't follow why he would do this, rather than look at the net equity in the property.

Read on McDuff!

John

I did and I'm sure it is only me who is confused but I've never understood such matters. Without going too much further off-topic, are you able to explain?

PinkDalek wrote:

redsturgeon wrote:

*** I don't follow why he would do this, rather than look at the net equity in the property.

Read on McDuff!

John

I did and I'm sure it is only me who is confused but I've never understood such matters. Without going too much further off-topic, are you able to explain?

Briefly because Mel used cash for her original deposit while his was mortgaged.

John

redsturgeon wrote:

PinkDalek wrote:

redsturgeon wrote:
Read on McDuff!

John

I did and I'm sure it is only me who is confused but I've never understood such matters. Without going too much further off-topic, are you able to explain?

Briefly because Mel used cash for her original deposit while his was mortgaged.

John

We have a deed of trust that covers all that. It (basically) says that while the mortgage is joint (it has to be) he is responsible for it and in any sale or split I always get half the value first (except in a loss situation, where mortgage gets paid first, then me) because I paid half the value on purchase.

He paid half as well, but with a mortgage which I then had to be party to.

But, yes, PD, you are right about the SDLT being 2% of the excess over the lower limit, it's no longer the cliff edge it was, though it starts lower. I think the 1% mentioned upthread was about something else or was an old amount.

But, no matter how much it is - the core question is on what it is payable really.

I think there is an argument in fact to suggest that the deed shows he always paid the mortgage and it was on his 'half' - therefore there is no SDLT on that part, only on the part he is buying directly off me - the £175k. Please

Mel

melonfool wrote:I'm not taking any account of any agent fees as they are not payable so no need to try to complicate matters with them (other than to remind him he is benefiting from not paying them). And I am not reducing by 10%, that's a daft notion.

It's not "daft" in the sense that it is a fairly standard discount that is applied for tax purposes in these situations. And it's fairly clear that you would struggle to sell half of a 350K house in the open market for 175K, because nobody wants to buy half a house and share it with a stranger.

Which is not to say that you should accept any offer you are not happy with. Only that if a neutral arbitrator was considering what number to come up with for a buy-out, some kind a discount like that would probably be applied.

The agent fees and selling costs are not a lot but, again, strictly speaking you are selling your half of the net value of the property, which might be 345K rather than 350K.

So playing devil's advocate here, if I were him then I would start with an offer of 345K, dividend by 2, less 10%. That's 155,250. And expect to agree a number somewhere between there and 175K.

melonfool wrote:No I can't "force" a sale, but I can tell him 'oh well, we can't agree, best sell' and see what happens then.

Having now read that his child lives there, it's more unlikely that a court would approve a partition sale. They are also undesirable because it means that a court trustee would perform the sale rather than the owners, which I would imagine means that the sales price might not be as good.

So either you both have to agree a buy-out or you both have to agree to sell. Given these difficulties I would not have thought that a few hundred quid in stamp duty would be a deal breaker. If it were me I might even offer to pay half of it just to smooth things along, as part of the negotiations that you are going to have on buyout price anyway.

Lootman wrote:

melonfool wrote:I'm not taking any account of any agent fees as they are not payable so no need to try to complicate matters with them (other than to remind him he is benefiting from not paying them). And I am not reducing by 10%, that's a daft notion.

It's not "daft" in the sense that it is a fairly standard discount that is applied for tax purposes in these situations. And it's fairly clear that you would struggle to sell half of a 350K house in the open market for 175K, because nobody wants to buy half a house and share it with a stranger.

It is daft because no-one is trying to, or going to try to, sell half a house. It's nonsensical to even bring up.

Lootman wrote:Which is not to say that you should accept any offer you are not happy with. Only that if a neutral arbitrator was considering what number to come up with for a buy-out, some kind a discount like that would probably be applied.

Well, no such thing was applied last time I did this. And time I was the buyer so it would have been in my favour. I have many friends who have been through this and never heard of this. You would think all the 'buyers' in this situation would be doing this, wouldn't you?

Lootman wrote:The agent fees and selling costs are not a lot but, again, strictly speaking you are selling your half of the net value of the property, which might be 345K rather than 350K.

So playing devil's advocate here, if I were him then I would start with an offer of 345K, dividend by 2, less 10%. That's 155,250. And expect to agree a number somewhere between there and 175K.

He's already offered £175k but when he comes here to ask the question you are welcome to advise him.

melonfool wrote:No I can't "force" a sale, but I can tell him 'oh well, we can't agree, best sell' and see what happens then.

Lootman wrote:Having now read that his child lives there, it's more unlikely that a court would approve a partition sale. They are also undesirable because it means that a court trustee would perform the sale rather than the owners, which I would imagine means that the sales price might not be as good.

Funnily enough the child doesn't 'live' there - the mother has residency He gave her all the equity from the marital home to house the child six years ago. Sadly she blew it on a BMW X5 and now lives in a caravan, but technically the child lives with her.

And, I am not stupid enough to go to court to try to force a sale. I never said I would.

Lootman wrote:So either you both have to agree a buy-out or you both have to agree to sell. Given these difficulties I would not have thought that a few hundred quid in stamp duty would be a deal breaker. If it were me I might even offer to pay half of it just to smooth things along, as part of the negotiations that you are going to have on buyout price anyway.

No - according to you, I could offer my half for sale I might do that, thanks for the tip.

Or, I could just refuse and carry on living there.

But you're right - I am happy to pay a few hundred pounds of his stamp duty. As long as he agrees a sensible value for the house and pays half of mine too

Mel

melonfool wrote:I could offer my half for sale I might do that, thanks for the tip. Or, I could just refuse and carry on living there. But you're right - I am happy to pay a few hundred pounds of his stamp duty. As long as he agrees a sensible value for the house and pays half of mine too

He's actually offered you 175K already? I thought you said he disputed the 350K valuation, even though he was the one who obtained it.

I'd accept his 175K, offer to pay half the stamp duty (whatever it is) and move on. And that's my last word on the subject.

Lootman wrote:

melonfool wrote:I could offer my half for sale I might do that, thanks for the tip. Or, I could just refuse and carry on living there. But you're right - I am happy to pay a few hundred pounds of his stamp duty. As long as he agrees a sensible value for the house and pays half of mine too

He's actually offered you 175K already? I thought you said he disputed the 350K valuation, even though he was the one who obtained it.

I'd accept his 175K, offer to pay half the stamp duty (whatever it is) and move on. And that's my last word on the subject.

Yes, he has offered £175k. The request to pay his stamp duty came later (and I totally cannot see why I would do that)

I can't understand why you would accept it when I have evidence that the house value is more like £380k and even his own EA said £365k and it was valued at £350k nearly two years ago - surely even on those scant facts you would think the offer should be higher (ignoring stuff about discounts for not being able to sell half)?

If he moves it up to £185k I will pay half his SD.

Mel

There seems to be rather more heat than light being generated here.

Firstly, if you aren't happy with the valuation then probably the best way forward is to agree to appoint a valuer that's acceptable to both of you and to abide by their finding. It's obviously a bit of a gamble, but if what you say about local prices is correct the odds are stacked in your favour.

If you can arrive at an agreed valuation the settlement terms would seem to be more or less automatically agreed.

In normal cases the amount payable is not just half the valuation less the mortgage. When a court is dealing with this question in divorce cases they would normally allow a deduction for sale fees - say £5,000 - on the basis that if you were actually selling the house you'd each have to stand half of these.

There is definitely no discount for the fact that you can't sell a share in a house. That’s a complete red herring, and is only relevant when valuing a share in a house where one of the joint owners has died.

So let's assume you get an agreed valuation of £370k. In normal circumstances you deduct the mortgage of £65k and £5k for sale costs, leaving £300k to be split, so you'd get £150k.

However, as I understand it you've agreed that you will receive half the actual value. It would still be reasonable to deduct the sale costs, but if your trust deed ignores these so can you.

In that event you would receive £185k net. In my opinion the SDLT payable would be 2% of that, i.e. £3,600. Incidentally, there appears to have been a misunderstanding by an earlier poster that SDLT is only paid on the balance over the threshold - it's not, once the threshold (£125k) is passed SDLT is paid on the whole amount.

Again, in normal circumstances the chargeable consideration would be assumed to be not just the £180k but also half the outstanding mortgage (£32.5k) making a total of £212.5k and SDLT of 2%, i.e. £4,250. However, because the trust deed entirely exempts you from any liability to pay the mortgage I would argue that the value of the mortgage should be omitted from the calculation. This is because your ex isn't assuming liability for any greater debt than he already has.

So if you do agree to pay half the SDLT make sure you deploy that argument, so as to save yourself £325 on the basis that every little helps!

If your ex won't play ball at all then to be honest it's probably worth instructing a solicitor. The solicitor can then make him a formal Part 36 Offer of settlement. The rules are too complicated to explain here, but basically it puts him at serious risk of a very large bill for legal costs if he rejects it.

Clitheroekid wrote:
Again, in normal circumstances the chargeable consideration would be assumed to be not just the £180k but also half the outstanding mortgage (£32.5k) making a total of £212.5k and SDLT of 2%, i.e. £4,250. However, because the trust deed entirely exempts you from any liability to pay the mortgage I would argue that the value of the mortgage should be omitted from the calculation. This is because your ex isn't assuming liability for any greater debt than he already has.

So if you do agree to pay half the SDLT make sure you deploy that argument, so as to save yourself £325 on the basis that every little helps!

If your ex won't play ball at all then to be honest it's probably worth instructing a solicitor. The solicitor can then make him a formal Part 36 Offer of settlement. The rules are too complicated to explain here, but basically it puts him at serious risk of a very large bill for legal costs if he rejects it.

Ah - thank you! So, my assumption, buried above, that our deed could override (or, that one could argue it did) the transfer of the debt, is correct. Good.

We can easily show the payment of the mortgage going from his personal account to the joint account and thereby to the mortgagee.

You're right, if I do end up agreeing to pay half of this I will ensure his solicitor knows this argument (ex may not even have shown them the deed - who knows).

I have instructed a solicitor - but I don't, at this stage, wish to ask them to be involved in negotiations as I know that way bankruptcy lies for both of us. He said he was asking his solicitor if SDLT was due - I was fairly sure it was, but those articles I found were confusing. I thought it was a fairly simple question but then people kept coming up with odd suggestions like gifting half this tax year (I'm not gifting anything!) and half next, and taking off 10% and selling half the house....etc.

At the end of the day, I can just go back and accept the £175k of course. I just feel that 1) it should be a bit more on the basis of the data I have dug up and 2) surely that was an 'opener' and he didn't expect me to accept it? He actually hasn't said no to my counter offer - just ranted at me and asked me to pay half the SDLT.

My solicitor said they would just oversee the transfer and check my release from the mortgage, then pass me to their property division to do the conveyancing on the new place.

Thanks!

Mel

"Incidentally, there appears to have been a misunderstanding by an earlier poster that SDLT is only paid on the balance over the threshold - it's not, once the threshold (£125k) is passed SDLT is paid on the whole amount."

I was one of those who thought we no longer had the slab system for SDLT.

Far from me to query anything you say but can you please explain why this https://www.gov.uk/stamp-duty-land-tax/ ... erty-rates, which has SDLT showing £125,000 at nil and immediately above that at 2%, is incorrect or inapplicable in this situation?

Clitheroekid wrote:
In that event you would receive £185k net. In my opinion the SDLT payable would be 2% of that, i.e. £3,600. Incidentally, there appears to have been a misunderstanding by an earlier poster that SDLT is only paid on the balance over the threshold - it's not, once the threshold (£125k) is passed SDLT is paid on the whole amount.

I know next to nothing about SDLT, but had a vague recollection that it was (now?) marginal i.e. nothing on the first £125k, 2% on whatever falls in the next band up and so on.
I don't want to muddy the waters too much so please ignore this if I'm way off!

AleisterCrowley wrote:I know next to nothing about SDLT, but had a vague recollection that it was (now?) marginal i.e. nothing on the first £125k, 2% on whatever falls in the next band up and so on.

SORRY!! Yes, you're both quite right of course, SDLT is only now paid on the amounts between the bands, and not on the whole price

So the figures would be (at £180k) £1,100 and at £212.5k £1,750. The saving's still the same though, at £325.

I can only put forward as an excuse that it's late at night, I'm knackered and I've also had the best part of a bottle of a rather good wine with the unlikely name of Ruggabellus Efferus - it sounds like something I might be trying to say after the consumption thereof, but is extremely delicious

Ruggabellus Efferus

I just have to look that one up

AleisterCrowley wrote:Ruggabellus Efferus

I just have to look that one up

As mentioned here as a wild card: viewtopic.php?f=20&t=1909&p=17817&hilit=Ruggabellus+Efferus#p17817

Looking forward to Clitheroekid's summary of the wines once tasted, over there.

Clitheroekid wrote:There is definitely no discount for the fact that you can't sell a share in a house. That’s a complete red herring, and is only relevant when valuing a share in a house where one of the joint owners has died.

Sorry but I beg to differ. I was explicitly told by both a solicitor and an accountant in a similar situation that the lack of marketability of one half of a house absolutely does devalue that half. And that makes perfect sense because, realistically, how can Mel sell a half share in a house? Who would buy that house with the idea of sharing it with a total stranger? It's like selling a property with a sitting tenant - worth less.

Moreover HMRC explicitly takes this view, at least for the purpose of inferring a capital gain when a half share is transferred for no consideration.

Now, we are talking here about a negotiation and either party is entitled to advance any argument they want, and nobody has to accept any deal that they do not like, for any reason, no reason or a bad reason. BUT it seems entirely reasonable that Mel's ex should assert that a half share is worth less than half a full share.

I have to ask but will he get a mortgage for 240k? (your 175k plus 65k existing mortgage) If he can't you need to put it on the market.

Lootman wrote:

Clitheroekid wrote:There is definitely no discount for the fact that you can't sell a share in a house. That’s a complete red herring, and is only relevant when valuing a share in a house where one of the joint owners has died.

Sorry but I beg to differ. I was explicitly told by both a solicitor and an accountant in a similar situation that the lack of marketability of one half of a house absolutely does devalue that half. And that makes perfect sense because, realistically, how can Mel sell a half share in a house? Who would buy that house with the idea of sharing it with a total stranger? It's like selling a property with a sitting tenant - worth less.

Moreover HMRC explicitly takes this view, at least for the purpose of inferring a capital gain when a half share is transferred for no consideration.

Now, we are talking here about a negotiation and either party is entitled to advance any argument they want, and nobody has to accept any deal that they do not like, for any reason, no reason or a bad reason. BUT it seems entirely reasonable that Mel's ex should assert that a half share is worth less than half a full share.

Except he is not asking for advice, I am. And not on this matter - merely on what SDLT is payable on.

If you wish to have a discussion about whether half a house is worth five beans please don't do it on my thread which is about a different issue.

Mel

pompeygazza wrote:I have to ask but will he get a mortgage for 240k? (your 175k plus 65k existing mortgage) If he can't you need to put it on the market.

He's got a mortgage in principle offer for £400k.

Mel

(I have actually managed to procure a mortgage offer myself now, it has been very hard-going due to my work/self-employed/taking breaks from work to study/do things for charity etc and I have had to speak to several brokers - but I do now have an offer of up to £115k )