I am in the process of buying a 2nd hand house along with one of my friends and we want to have an agreement drawn up between us to cover the unlikely event of one of us wanting to sell up for any reason (falling out with each other, moving in with a girlfriend, moving abroad etc..)
The house cost €338k. We are both FTBs so our stamp duty is €10,140 and our legal costs are €2k incl VAT. We are also putting €7.5k each in a joint bank a/c to cover the work which needs doing (we will be doing most of it ourselves), all other expenses, mortgate payments, bills etc are split 50/50.
Does anyone have any experience of such agreements? I would have thought they are quite common but can't find any online. We want the agreement to slightly favour the buyer if possible. What we were thinking was:
- The person who wants to sell (seller) must give the other person (buyer) 3 mths notice.
- The buyer can agree to buy out the seller or else the house must be valued and go on the market after the 3 months.
We were thinking that within the first two years that the buyer will only have to pay half the original cost (including stamp, legal and renovation costs plus half the amount the mortgage was reduced by) and that no rise in value (if any) will be taken into account. This should cover the amount of labour we will each have invested.
After two years it should be sold at market value (average of 2 valuations). The seller should pay the legal fees of both the buyer and seller.
- Would the seller have to pay capital gains tax on just their half if we have the house less than 5 years or would they pay capital gains on the total price of the house?
- Would the buyer have to pay stamp duty to buy out the other half of the house?
After 5 years we plan to sell it anyway and buy our own houses. All selling costs & profits (if any) will be split 50/50 as there wil be no capital gains tax due.
Our solicitor has said she will put our agreement into a legally binding document for us if we decide what we want in it (if we want her to come up with the terms that will cost us an extra €600)..
PS. The reason we want it to favour the buyer is because the house will have appreciated in value by around €50k when the work is carried out according to the bank's valuer and an independent surveyor so we don't want to be tempted into selling up for a small profit and having lost our FTB status.
The house cost €338k. We are both FTBs so our stamp duty is €10,140 and our legal costs are €2k incl VAT. We are also putting €7.5k each in a joint bank a/c to cover the work which needs doing (we will be doing most of it ourselves), all other expenses, mortgate payments, bills etc are split 50/50.
Does anyone have any experience of such agreements? I would have thought they are quite common but can't find any online. We want the agreement to slightly favour the buyer if possible. What we were thinking was:
- The person who wants to sell (seller) must give the other person (buyer) 3 mths notice.
- The buyer can agree to buy out the seller or else the house must be valued and go on the market after the 3 months.
We were thinking that within the first two years that the buyer will only have to pay half the original cost (including stamp, legal and renovation costs plus half the amount the mortgage was reduced by) and that no rise in value (if any) will be taken into account. This should cover the amount of labour we will each have invested.
After two years it should be sold at market value (average of 2 valuations). The seller should pay the legal fees of both the buyer and seller.
- Would the seller have to pay capital gains tax on just their half if we have the house less than 5 years or would they pay capital gains on the total price of the house?
- Would the buyer have to pay stamp duty to buy out the other half of the house?
After 5 years we plan to sell it anyway and buy our own houses. All selling costs & profits (if any) will be split 50/50 as there wil be no capital gains tax due.
Our solicitor has said she will put our agreement into a legally binding document for us if we decide what we want in it (if we want her to come up with the terms that will cost us an extra €600)..
PS. The reason we want it to favour the buyer is because the house will have appreciated in value by around €50k when the work is carried out according to the bank's valuer and an independent surveyor so we don't want to be tempted into selling up for a small profit and having lost our FTB status.