Brothers joint house owners

A

appollo10

Guest
Ok here is the senario....
2 brothers, joint owners in a house in Lucan.
Brother A has to move down the country due to work.
Brother B wants to buy out Brother A's share of the house.
House was bought for €190,000 5 yrs ago
House is valued at € 280,000 now.
Morgage is €160,000 at the moment.
Brother B is only offering A €40,000 for the increase in Value over the 5 years.
"A" wants the full €60,000 ( which is half of the Value less morgage).
I am the brother in between.... can anyone shed some light on the problem besides selling to another.
Appollo
 
can anyone shed some light on the problem besides selling to another.

I think thats the problem. If there is an impasse - then someone has to give. I think if I was selling out, I'd want my full value too - I think I'd feel otherwise that I was making a gift to someone who may very well go and sell the house just as soon as I went. And if I was staying put I'd be aggrieved and would want a discount - just because I wanted it or maybe because I could not raise the extra cash. Is that the reason?

If they cannot sort it out, then either of them could go to Court but that is expensive and messy and will cause bad feeling.

They need to start talking.

mf
 
Has anyone ever heard of a "double bind" arrangement that can be used in circumstances like this. It was explained to me many years ago by a solicitor as a means to resolve disputes like this in as part of a pre-nuptual agreement.

You would have to visit a solicitor to set it up.

1) Party A makes a considerd bid for his share of the property. (Lets say €55k for the sake of example)

2) Party B has a choice he can either:

2a accept the offer in which case this is the end of the matter.

or

2b reverse the bid and offer A €55 for the property. This reverse bid is binding.

This encourages A to think very carefully about the bid he makes. Too high and B just accepts it, too low and B just reverses it.

Its a variation on the old "You cut the cake and Ill choose the slice" trick.

Another option might be to put several bids on paper (ie 60,55,50,45, 40 etc) and draw one from a hat.

Anyway Brother C good luck with your arbritation!

ajapale
 
buy-out of house share

Personal view; not a legal opinion:

They should first tot up exactly what they would be left with after all the costs of an actual house sale.

The brother leaving the house certainly shouldn't be looking to get any more than one half of this nett figure into his hand.

Possibly there should be some small discount from this to reflect the fact that the brother staying put is having this decision thrust upon him - but the max discount that I would consider fair is one which would impute all (instead of half) of the (deemed) sale transaction costs to the brother who is leaving.

After that, I don't really see the justification for further discounts: after all, the brother who is leaving is going to have to house himself elsewhere, incurring a further set of transaction costs, while the brother staying put has a house half of which was bought at a good price a few years back, and half of which was bought without being hit for heavy transaction charges.
 
Re: buy-out of house share

Why don't they split the difference at 50k?

It should be explained to them that if they don't sort it out, it could get very silly and very (legally) expensive, i.e., 'I'm not letting you paint the walls because I own half the house' or 'here's an invoice for the paint & my labour because you own half the house.'

Maybe they should read MOB's comments in the thread about the competition authority's report on the legal profession!
 
Re: buy-out of house share

Aja,

Good suggestion on the "double-bind" mechanism. It is the ideal solution in the case of two parties who want to split an asset but works best when sole ownership of the asset would be equally valuable to both parties.

The problem for brother B (the one leaving Dublin) is that A (the one staying) knows that B doesn't want the house.

If B believes A's offer undervalues the house and B exercises his option to purchase at the price of the offer, he'll end up with an asset he'll need to sell and will have to pay yet another set of transactions costs (which economists would describe as a deadweight loss).

Therefore, A will price this into his offer and B won't get as much as he would have got had he (B) been able and willing to stay on in the house.

The discount at which the asset will be purchased should equal exactly the disposal costs that would arise for B in selling the house after buying it from A.

While it's a fascinating logical conundrum, it's a horrible situation and it points, as ever, to the critical importance of settling on an agreement in advance of property purchase for the system to be employed in the event of a subsequent termination of the agreement.

Do solicitors not raise this as an issue at the time of such initial purchases? If not, why not?
 
Re: buy-out of house share

also make sure that they find a solicitor who will do the paperwork for a flat fee rate including vat and not 1 or 2% of €280k + VAT like they normally charge. The ownership is changing to the owner so no searches n stuff.

I am minded to recommend split the difference to 50k and let the country brother organise the solicitor out of the 50k if they wont go double bind to incentivise him to save money for himself and seeing as he started the hassle . Double bind sounds complex to some people.

(great idea that , must GooHoogle)
 
Re: buy-out of house share

Solicitors regularly advise their clients to put an agreement in place in situations such as this and clients regularly ignore us.

As regards flat fee for solicitor to do the work, that is fine so long as the agreement is formalised plus there will be searches, registration fees and potential stamp duty and CAT implications.

I'm (very unwillingly) embroiled in a vicious row at the moment between a separating non- married pair relating to the purchase out of a half interest in the property owned by them jointly. There was no agreement when they bought. The row has escalated out of all proportion, tempers are badly frayed, agreements have been made and broken and I am not prepared ( and I've told my client) to continue to act as a referee. Its really bad when warring parties are happy to involve everyone they can find in the slanging match - its not a good way to resolve issues.

mf
 
Re: buy-out of house share

mf,

Would the ILS not develop a standard agreement which could be offered to such purchasers initially, at a nominal charge - or even gratis? Or would it be bad for business? :$
 
Re: buy-out of house share

But sure theres a perfectly good one on this board courtesy of Mr. Burgess!!

mf
 
inbetween

B is offering too little with half the increase in value, basically he's doing A out of the fact he has being paying (half?) the mortgage for the last 5 years.

A is expecting too much by expecting the full 60K, as he is not taking into account the costs if the house was to be sold (1-2% estate + legal), plus as has been said there should be a (small) discount for the fact that A is forcing the situation.

I would think 50-55K is a fairer price, but there's some good advice above for a solution (I like the double bind) plus as has been said, all of this should have been put down on paper before they entered into the agreement to begin with.
 
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