Buying out my Sister's 20% Share in Apt

Calcutron

Hi All,

Bit of a tricky one that I need some advice with.
I bought a 2 bed apartment in Dublin in Sept 2006 for 317k (Mort €292k), at the time I needed help to get the mortgage, so my sister stepped in with a 20% share. (ie. she paid 20% of the €26k deposit and her name was put on the deeds with me and we wrote up an 80/20 friends agreement with our solicitor). It is my PPR and she lives outside Ireland and has no intention of moving home and was really doing it as a mini investment and to help me out at the time.

When I realised soon into the mortgage that it was going to be a much longer time before she would see any return on her investment I told her the best bet would be for her to step out and me to take over the full mortgage. Also in that time my salary increased to €70k which makes the €1,213 pm (4.9 fixed rate) totally affordable.

So all she really needs is her €5.2k back from the deposit and she's happy as larry. She expects nothing else. My problem is that inorder to do that (cause we stupidly put her name on the deeds) ,I will incur solicitor fees, have to remortgage in my name alone, potentially lose my FTB status (is that right?) and consequently have a reduction in TRS by about €100 a month.

Is there any simpler way around this? All I want at the end of the day is to get her name off the deeds. I have no intention of selling for at least 5 years, so I could just let things stay the way they are, givve her the €5.5K and sort it out down the line. Or is ther another option?

Appreciate your opinions on this one.

loyatemu

give her back the money and get the friends agreement amended - not sure what the implication are for TRS though.

also - don't fall out with her in the future - I doubt such "friends agreements" carry much legal weight.

The_Conductor

You do not loose your FTB status- as you were a FTB when purchasing the apartment and are now buying her out, and it has remained your PPR the whole time.

Unfortunately if you do wish to remove her from the deeds it will most certainly incur solicitors fees etc.

A more pressing problem might be concerning the mortgage- the lender may have an issue with giving you a mortgage on a property that you are not the whole beneficial legal owner of (i.e. you may very well have to go and incur the solicitors costs etc getting the deeds amended). Check with your lender on this one. It may very well be the case that the fees involved in amending the deeds may exceed the sum to be paid back to your sister.......

jdivision

Was your sister a first time buyer too? Does she own property anywhere else

The_Conductor

Ps- your sister has exhausted her FTB status in Ireland through this transaction.

Calcutron

Thanks everyone.

My sister is living abroad for the last 12 years and is very unlikely ever to return to live in Ireland. Therefore her FTB status is of little interest to her over here. She has no property herself yet, but herself & her partner may consider buying over the next couple of years in Australia.

QUOTE: 'A more pressing problem might be concerning the mortgage- the lender may have an issue with giving you a mortgage on a property that you are not the whole beneficial legal owner of (i.e. you may very well have to go and incur the solicitors costs etc getting the deeds amended). Check with your lender on this one. It may very well be the case that the fees involved in amending the deeds may exceed the sum to be paid back to your sister....... '

Yes this is what I feared. Has anyone ever heard of changing names on the mortgage without changing the names on the deeds? Which is it most important for me to do?
ie: Can i leave her on the deeds and draw up a new agreement precluding her from any rights to the property in the future? Would that even be any cheaper?

jdivision

If she had have bought a property anywhere in the world before she bought here with you, you would have been liable for stamp duty when you purchased your house because her name was on the deeds. That would have complicated matters further so there was a need to ask the question.

The_Conductor

Calcutron wrote: »

Can i leave her on the deeds and draw up a new agreement precluding her from any rights to the property in the future? Would that even be any cheaper?

Possibly cheaper- but it has no legal standing and would be open to challenge. Its far tidier to simply take the hit and get the deeds amended.

Alfaservice

You can buy out your sister's interest by way of a transfer under which you would be giving her €5.2K for her interest in the property. When the transfer is lodged in the Land Registry, the property would go into your sole name, ie your sister would be off the title. That's assuming it's a Land Registry property and not Registry of Deeds. Your solicitor might also suggest that you and your sister would sign mutual Deeds of Waiver whereby your sister would forgo any claim she might have in relation to your apartment. There'd be no liability to stamp duty on the Transfer as it's below the threshold. However, a solicitor is going to charge you for drafting and lodging it. Land Registry fees will also cost €125.00.

Even then, your sister would still appear on the mortgage. The only way to take her off the mortgage would be to take out a new one in your sole name and redeem, ie pay back, the joint mortgage. Again, a solicitor is going to charge you for this because it entails the same amount of work as buying an apartment from scratch. You could expect to pay around €2,000 to €2,500 in total depending on the professional fee charged.

It sounds like you and your sister are on friendly terms. If you simply hand her the money without gettting the legals signed up and watertight, how likely is she to stake a claim further down the road? Given the likely expense of buying her out compared to the amount you're going to give her, you might be better to simply agree informally that, on receipt of the €5.2k, she no longer has an interest in the property. Leave her on the title and on the mortgage, you continue paying the mortgage, and agree that when the property is sold she'll co-operate and sign everything that needs to be signed but that you'll receive the proceeds of the sale in their entirety.

amen

If you simply hand her the money without gettting the legals signed up and watertight, how likely is she to stake a claim further down the road

the op doesn't say is her sister is married or has dependants but if the ops sister died after the 5.5k was returned to the sister and the sisters name was on the deeds would the sisters dependants not have a right to some of the property?

The_Conductor

amen wrote: »

the op doesn't say is her sister is married or has dependants but if the ops sister died after the 5.5k was returned to the sister and the sisters name was on the deeds would the sisters dependants not have a right to some of the property?

They would indeed. It would legally be part of the OP's sister's estate, and the executor of the estate could potentially force a sale of the property to recover 20% of the asset value (as per the original ownership agreement, and totally aside from the fact that she only ever paid 20% of the original deposit).

To be honest- its a messy situation, and will be cumbersome to resolve- it'll probably cost the OP more than the original EUR 5.5k in legal fees to get his sister removed from the deeds.

Alfaservice

amen wrote: »

the op doesn't say is her sister is married or has dependants but if the ops sister died after the 5.5k was returned to the sister and the sisters name was on the deeds would the sisters dependants not have a right to some of the property?

Yep, you're absolutely right. But only if she died intestate. She could avoid that situation by making a will and leaving her entire interest in the property to the OP. Again, more hassle. No easy way around this one.