I own a stake in a shared property, can I afford to buy out a minority stakeholder?

Posted on 15 November 2007

I recently bought a flat with my partner and now just 4 months down the line we have split.

I own 50% of the property, my partner 41% and his sister 8.85%. This is because we were required to put down a 15% deposit and I had only half of this so my partners sister put in half too. We bought the property for £226,000. my partner's sister drew up the contract detailing this split.

Anyway, so now I would like to buy his sister out and take ownership of the property. Basically I need to buy his sister out using cash and then my partner just the equity his percentage has earnt him. However, having read a few stories I don’t think my £35k a year salary would give me enough buying power to take on the flat anyway. Would I be better off buying his sister out and coming to a deal with my ex partner and leave the mortgage and flat in both our names? And then on selling or moving he benefits in accordance with the deal?

Angela

Hi Angela,
 
I don't know if you actually do own half of the property each (you bought as tenants in common) or if you are jointly and severally liable (you bought as joint tenants, the normal route) you would need to go through it all with a solicitor, please ensure that you all receive legal advice from separate lawyers.
 
Your mortgage lender might allow you to increase the mortgage now to repay what the sister lent for the deposit, (although they won't want to hear that you've split up by the way if you're keeping the mortgage and flat with him)  For an idea of what it's worth now, ask an estate agent for a realistic price on the property, and ask for comparables that have sold for that recently. In four months it is unlikely that the property will have increased in value much.  It probably wouldn't cover any sale HIP/ estate agent/ legal costs anyway, and if you want the lender to tell you, they might charge you for a survey.
 
£35,000 would cover about £175,000 of mortgage, you might be able to push them to the full amount of £209,000 as you had a little cash deposit. Your own lender is your first port of call.  After that, you might need to look at Abbey or Alliance and Leicester who can often stretch that far for someone with a good credit score.
 
What I would say at this stage is, don't stretch yourself.  You might be better off selling the property and cutting your loses. The property market is not looking good next year, with falls of 5% predicated by many. The last thing you want is to have a large mortgage that you may struggle with on your own, and a property worth less than the loan so you couldn't even sell it to get out if you had to.

Category: Separation or Divorce

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