Home owned in thirds, buying out brother

[Abacus]

A mother has already given a share in the family home to her two children.
Each of them now has a third share in the house. One sibling wants to mortgage to buy out the other sibling, who will use the money to buy his own home.

How will this look to the legal department in a mortgage company ?

If one sibling gives 1/3 of the value to the other, she will them own 2/3rds of the house, but the mother will still own a third and have a right of residence. Down the line, the sibling bought-out could inherit another 1/6th (final 1/3 in halves).

Such situations must arise from time to time. What are the sensible approaches to a mortgage application. ?

 

[mf1]

The only thing to do is to approach a lender and ask.

The issues will be

1. Proper values acceptable to Revenue
2. Stamp Duty will be at half the normal rate on the market value of the share being purchased. If there is a difference between market value and sum being paid ( i.e. element of gift involved) there may be Capital Acquisitions Tax implications. But there may be reliefs if the house is the primary residence of purchaser.
3. Mother will have to "postpone" her Right of Residence in favour of the lender. She will also have to join in the Mortgage. Mother should be separately advised so that she quite clearly recognises her vulnerability should the mortgage go into arrears.

mf

 

[plant43]

I nearly went through something similar, and the right of residence will be a sticking point. I've had solicitors refuse to let someone sign away their right of residence to become party to a mortgage on the house. The mortgage will have to be over the whole house, it can't be just over 1/3 of it.

 

[mf1]

I nearly went through something similar, and the right of residence will be a sticking point. I've had solicitors refuse to let someone sign away their right of residence to become party to a mortgage on the house. The mortgage will have to be over the whole house, it can't be just over 1/3 of it.

In fairness, its seldom "solicitors refusing to let"............. Very often elderly clients do not understand the implications of "postponing" the Right of Residence until you sit them down and go through it with them at which stage they change their minds.

I would, on occasion, decline to act in such a scenario if I felt the elderly client was being bullied or manipulated into a scenario they did not comprehend. They are free to go elsewhere.

mf

 

[plant43]

In fairness, its seldom "solicitors refusing to let"............. Very often elderly clients do not understand the implications of "postponing" the Right of Residence until you sit them down and go through it with them at which stage they change their minds.

I would, on occasion, decline to act in such a scenario if I felt the elderly client was being bullied or manipulated into a scenario they did not comprehend. They are free to go elsewhere.

mf

Well it my case it was a perfectly sane person in their mid-30s that wanted to sign away the right of residence. He had already been advised by another solicitor what the implications were, and the solicitor doing the conveyancing was aware of this, but still wouldn't agree to oversee it.