I purchased a distressed property from a family member - need advice please.

Mods please feel free to move this post if its more suited to the legal section.

A couple of years ago an older family member of my wife remortgaged their home. The top up mortgage was to be paid back within three years.

Roll on a couple of years later and this individual is still paying the mortgage with a lesser amount. The bank become vexed because the mortgage was not paid off within the time frame. The letters became more threatening and all being told it became a very messy situation. The bank were on the verge of seeking repossession. The person in question had exhausted all avenues but the bank did not want to know.

This person became ill from sheer pressure that had been applied by the institution. If it had been me I'd have thrown the keys back at them and expressed my views to the mortgage holder but they were having none of it especially having come from a generation who paid their debts to the full.

To cut a long story short a family meeting was called and it was put to me to purchase this persons home before the bank finally closed in on them. I was hesitant at first but finally took out a mortgage and purchased it. This allowed the person to continue to live in their home and pay me the mortgage amount each month.

Now this is were it gets technical - the house is now in negative equity and I have a fifteen year mortgage remaining on it. There is absolutely no problem with this person paying mortgage.

The family member has recently come into money and I was thinking of asking them to make some sort of contribution.

Is this way out or order on my part?

It seems like a messy arrangement.

Did you buy the house at its correct value? Or did you pay more or less than it was worth?

What did you agree with them when the deal was done?

What are you declaring for tax purposes?

There is absolutely no problem with this person paying mortgage.

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You own the house. This person is now your tenant and paying you rent. They are not paying the mortgage even if that is how you see it.

What happens after 15 years if the current arrangement continues? Will they think that they own the house now that "they have paid off the mortgage"? Will other members of the family think that the house forms part of their estate when they die?

I think you need another family meeting.

Brendan Burgess said:

What happens after 15 years if the current arrangement continues? Will they think that they own the house now that "they have paid off the mortgage"? Will other members of the family think that the house forms part of their estate when they die?

I think you need another family meeting.

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That is now my concern as this person has an ex wife and adult children who were not made aware of the new position. This person did not want them informed.

When they pay off the mortgage they want the house transferred back into their name.

I paid what the house was worth at that particular time.

Boomtobust said:

When they pay off the mortgage they want the house transferred back into their name.

I paid what the house was worth at that particular time.

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It looks to me that you were and are being taken advantage of. The family member transferred all the risk of owning the property to you but wants to retain the benefits of ownership.

I think you need to try to put an end to this now, that they have come into money - can they buy the house back from you now, so you will have nothing more to do with it?

Additionally, there is a tax problem here - the money they are paying you is considered by the Revenue as your rental income, and you should pay tax on it. If you don't, you - and not the family member - will be in trouble.

If the family member pays you the exact amount of mortgage payments as rent, without extra for tax, it means you'll have to pay tax out of your own pocket.

If house prices increase by the time the mortgage is paid off, you'll have to pay capital gains tax when you transfer the house back to the family member. They will then be liable to gift tax on the market value of the property at the date of transfer back...

Get legal advice ASAP, otherwise you may be faced with a big mess down the road.

Thank you for your post Greta. The money they have come into is a large sum but not enough to clear the mortgage.

The property is in a small farming community in the west with little to no rental so if this person was to pass on there would be no selling or letting. This being my biggest concern.

I would never turf anybody out on the street but I can see now the big implications I face down the line i.e with this persons siblings and possible further negative equity.

As I am holding this liability would I be way off the mark in asking them to pay me some form of compensation?

Remember to pay your NPPR on this property. Deadline is approaching.

OP, did you not understand the full implications of what you were signing up to or were you not given proper legal advise?

I cannot see why you would be in a position to ask this person for money. The only option you have is to put the property up for sale; even though this will no doubt cause confrontation or just sit back and wait.

I think you do have a case for asking for some compensation as the current agreement is not fair to you, you get nothing out of it, but tax expenses and potential trouble. Get legal advice ASAP, then decide what to do.

Paying NPPR is important, otherwise you'll be faced with a big bill - the charge is only 200 euro a year (so far, it may increase/be replaced by a higher tax but for now it's 200 euro), payable by the person who owns the house on the 31st of March each year. However, if it's not paid within 3 months, there is a penalty of 20 euro PER MONTH, until it's paid, so it can accumulate quickly. There are already some threads here from people who didn't pay NPPR charge for a couple of years and are now faced with 1:-2K bills... You don't want that to happen to you.

Could your relative get a mortgage for the shortfall between the money you paid for their house and their inheritance, so that they can buy it back from you? I really think it would be best if at all possible if you could get out of this situation altogether, as you are carrying many risks for no reward whatsoever. It's not fair on you. You helped out when this person had no money, but now the situation has changed.

Thanks for your response Greta.

Unfortunatly the individual in question is gone beyond the age of getting a mortgage.

I have an apointment with a solicitor in the morning.

I met with solicitor who told me I was on a losing battle. He suggested I put the property up for sale or increase the rent the tenant was paying.

I contacted the tenant and told him I had sought legal advise. He was not amused and said I wouldn't be getting a cent from him but he would prevent me from selling the property.

My own financial position is very unstable and I have been advised to declare bankrupt.

I told this person that if I were to go bankrupt, then the house he is residing in would be in trouble.

I asked him straight up for money to avoid having to go down this route and he flatly refused.

Go in and change the locks when hes gone and kick him out or else just hand the keys back to the bank as you are not getting anything out of this but hassle. Stop paying the mortgage and put the money into another account the bank dont have access to so you can save yourself a few quid.

I wouldnt be happy with his response and I would have him kicked out on his ass after you helped him for him to basically tell you to feck off.

Don't do the above. Not unless you do it legally and you follow all the rules for evicting someone. If you don't, he'll have the PRTB down on you like a ton of bricks. The last thing you need to be dealing with is a big fine from that lot.

Boomtobust said:

and said I wouldn't be getting a cent from him but he would prevent me from selling the property.

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How is he planning on doing that? It is your property. You can sell it or not sell it as you see fit. Don't let this ungrateful turds bluff and bluster put you off doing what is best for you.

You said in your original post that this all came about as your family got together and talked you into this arrangement, pretty much against you will. Are any of those people still around who could act as an intermediary between you both? As they do not have a financial interest in the matter, perhaps they could defuse the situation & assist in coming up with a line of communication where the two of you can come up with a workable solution to this mess, and are not face to face flinging insults at each other. It's the least your family could do imo, seeing as they got you into this mess in the first place !