Parting Ways on Joint Ownership

G

Gordon086

Registered User
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15
Hi,

I bought a house two years ago with a friend of mine, who now wants / needs to move on.

The problem is, the house is no longer worth what we paid for it including Stamp Duty, and in fact may not even be worth the sale price at the time. We have tried selling the house at the price we paid plus stamp duty but have had no interest whatsoever, and obviously do not want to reduce it any more as any likely offer is likely to be substantially less than the asking price, as seems to be normal now, and we would lose too much.

I would like to keep the house, and would be agreeably to giving him what he paid for it two years ago, which I think is fair, and hope that things improve in the future and I'd get my money back. The problem is that I don't want to pay stamp duty again, as I really be paying more than the house is worth, just so he doesn't lose out. Can he just sign the house over to me or reliniquish title, and I'll take on the mortgage and sort him out with what he paid at the time, or any other way around the stamp duty?

Thanks
 
Gordon086 said:
any other way around the stamp duty?
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You need legal advice. The basic point is that your liability to stamp duty is based on the value of property you are now obtaining. You're buying half a house which is worth a certain amount so the SD should be calculated on the basis of half the current value of the house. Him "signing over" the house to you does not alter the liability.
 
Thanks Oysterman. That's what I thought, but hoped against!!

The problem is that we don't want him to lose money, and we were prepared to hold onto the house in the hope that it'll go up to cover the cost of the original stamp duty in the future, but to do that now I'll have to pay the stamp duty on a sum that is more than the current market value, getting stung both ways!

The legals don't give any great advice, other than pay the stamp duty on what the house is worth, which doesn't help him. Basically I'd have to pay the stamp duty twice (on half the value) in order to sort him out. Giving him the amount he paid in stamp duty originally and paying the actual stamp duty now.
 
Can you post your figures?

Current value. Current mortgage ( the capital not the monthly payment).
If half the value less half the mortgage is less then 125K there may not be any stamp duty payable.

And stop worrying about sorting him out over and above what his share is now worth. All he is entitled to is half the value of the house less half the mortgage. He is then free of a mortgage whereas you have the full responsibility.

mf
 
Hi,

Thanks for your reply.

We bought the house just over two years ago for €413k plus €30,975 stamp duty.

There is €364k remaining on the mortgage (aprox €1,800 pm).

The house is now probably still worth €413k. Was on the market for €450 with no interest whatsover for 5 months (2 viewings) so to sell probably have to drop to €425 to get some interest and expect offers under that, if any. He'd lose half the stamp, which he paid two years ago, and to be honest, wouldn't agree to, so would be faced with having to rent it out and find somewhere else myself.

Not sure what you meant about half the value less have the mortgage etc.
I was assuming half the house value, less €125k would be liable to stamp duty, say €413/2 less €125 x 7%.......... €6k in stamp
 
Does your friend know that he will also lose his first-time buyer status?
 
Hi Gordon

Look at this from your friend's point of view. He bought a house for €206,500 + €15,487 stamp duty.

Two years later, he has to sell. That is tough. If he gets €200k, for the house, he just has to take those losses.

From your point of view, you bought a house for €206,500 two years ago. You are now buying another house for say €200,000 + stamp duty. You have to pay stamp duty on that. You are lucky. House prices are low now, and you are buying now.

It would be very unfair on you to be forced to sell your share now. You have lost your first time buyer status. You have negative equity. And you don't want to move.


1) You can buy his share at the current value.
2) He can rent his share to a tenant selected by you.
3) Could you find someone else who might buy his share from him?

Brendan
 
Gordon - What would your friend if the roles were changed vice-versa. I really think the best deal he is going to get is that you buy half the house at current value less the stamp duty. This is one of the problems of doing business with friends.
 
Look at the figures. The stamp duty money is dead and gone. It was a cost in acquiring the property.
There is only 49K in equity in this property. If he wants out he does not get to choose to take half the value of the house. If you buy him out, it should be at a cost to you of 25K AND you are taking over his share of the mortgage.

If he does not want to do this, or if you cannot borrow the additional amount required to take on the mortgage, then either you continue as is, sell to someone who wil take the property off your hands ( except now you have estate agents fees) or rent.

There is no stamp duty on 24.5K.

mf
 
Hi MF1

Why are you calculating the stamp duty on the equity in the house?

Surely it should be on the gross value of half the house?

Do you pay less stamp duty on a half a house with a mortgage than you do on half a house with no mortgage?

Otherwise, if I have a house worth €500k with a mortgage of €400k, could I not sell my equity and so the new owner would pay stamp duty on only €100k?

Brendan
 
Thanks for all your comments.

That's what I thought too Brendan, stamp duty on half the gross value of the house.

MF1, can it be calculated just on the equity? Great if so

I can get the money to buy him out, but obviously want to keep it to a minimum. Neither of us were first time buyers.
 
I'm pretty certain we've had this discussion before. I have always argued with Revenue on this one. If I am buying my partner out then it is vital to take the mortgage into account. Otherwise I'd be paying tax on an asset without discounting the debit ataching to it.

In the past, Revenue have insisted that they will only calculate the duty based on equity only if the Lenders are joined in the Deed to release the borrower being bought out and to consent to the now total owner taking over the entire mortgage. I've successfully argued the case that if the now total owner is taking on a substantially bigger mortgage with a new lender ( i.e. who will not join in the Deed of Conveyance ) then the situation is the same.

"Otherwise, if I have a house worth €500k with a mortgage of €400k, could I not sell my equity and so the new owner would pay stamp duty on only €100k?"

It depends on what you are selling/buying. If you are selling your own house in your own name with your own mortgage, then you have to redeem your mortgage and the purchaser acquires the entire property mortgage free and will pay stamp duty on the value of the property. If you are selling a share in your house, then the purchaser will pay duty on the value of the share they are buying - but your lender will not let you sell any part of your house unless the new part owner becomes jointly responsible for your total mortgage or you redeem your mortgage.

I'll be interested to hear any of the other legal/tax practitioners views.

mf
 
MF1

I have spoken to the revenue again, in light of what you have said in your posts and they agreed with what you have said in relation to equity, only after I brought it up with them.

Other than that they say pay the SD on half the market value less €125k.

I now just need to confirm that the lenders are joined in the deed.

Thanks
 
Camry


Discussion of the future direction of house prices is not allowed on Askaboutmoney.

I think my original post is very clear. He is getting an opportunity to buy the second half of the house at a lower price than he paid two years ago.
 
Brendan said:
Camry


Discussion of the future direction of house prices is not allowed on Askaboutmoney.

I think my original post is very clear. He is getting an opportunity to buy the second half of the house at a lower price than he paid two years ago.
Click to expand...

Just wondering if we are allowed to talk about the historic house prices?
 
Thomas

Please don't drag this thread off topic.

I think that the Posting Guidelines are very clear. If you read them and still don't understand them, then start a new thread in Suggestions.

Brendan
 
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