Ex partner forcing the sale of an investment property?

[rjdee1]

I own a rental property with my x boyfriend, we bought the property in 2007 december and lived in it for two years, and lived in a rental property for 1.5 years before that, when we broke up we stayed friends and rented the property out (It was only rented on a 12 month lease in Sept 2010). I was just going through the process of refinancing our joint debt to our mortgage so that all we will have left is the mortgage and splitting the rental income. I was refinancing at 6.75% for three years. The valuation just came back from the loan application and he went behind my back and found out what the property is worth and now he wont go ahead with the loan and is trying to force me to sell when it comes out of its current fixed rate in dec 2010. The property only costs us $63 per week each after the rental income comes in and its in an area that is growing and growing to the point where in three years it will be worth a lot more. I dont want to sell at all, and now he is trying to force me to sell because he wants to get a property on his own. We both pay the same on the current mortagage and we have no other assets together. I dont earn enough to sell and get a mortgage on my own like he does so its not smart for me to sell. Any advice on what I can do? Can I stop him from selling or drag it out in court for a few years so it gains more value? What are my rights? We were in a de facto relationship. Please please help me!! Im so stressed

 

[Mr. Fabulous]

So he is supposed to keep this property because you can't afford one on your own? Is that what you're saying? Buying a property in a situation like this comes with it's own set of headaches, as you are discovering. You have two options here, really: sell it or find a way to keep it yourself.

Your ex should be forced to hold on to the property because you want to keep it? If you cannot afford to keep it yourself, that is not his problem. Probably not the answer you were looking for, but hey life isn't fair. Might be time for you to start looking for a job with a higher income so you can afford your own place some day.

 

[Piston Broke]

Offer to buy him out at Valuation/2 less 20%.

Your rights are the same as his.
And if he does'nt pay the bank will chase both and take from whoever has the fund/assets to get there money.
This is not a situation (default) you want to be in if your planning future investments.

 

[Dazz]

The valuation just came back from the loan application and he went behind my back and found out what the property is worth

He owns half the house....he reads a document stating what the house is worth....and that constitutes, in your eyes, going behind your back ?? Regale me with your logic...

I get the feeling you currently run the show financially, and now he's starting to put his foot down you don't like it.....is that it ??

 

[Indifference]

Firstly, welcome to the forum.

Secondly, my commiserations on your relationship breakdown. (although it is sometime past)

Thirdly, your predicament sounds like it will realistically only have 2 outcomes which have already been mentioned. Either sell or one buys out the other.

If you can not afford to buy out his half of the property, the only thing the courts are going to do is cost you money . Yes, all those gains will be chewed up in legal fees and the whole mess will just stress you out even more.
Also, it will appear to be 'vindictive' from your ex's point of view.

Some of the other comments may seem harsh, but don't stress and don't do something you will regret later in life. Be rational and treat the situation as a business problem. This means finding an amicable solution.

Good luck.

 

[rjdee1]

Thanks guys. I know i sound a little harsh but initially when we bought the house i was on more money, I was buying on my own and he decided he wanted in on it, and I stupidly let him in on it. Then he encouraged me to go back to uni to complete my honours part of my degree and promised to support me, thats the only reason im on less money now as I had to go back to part-time, but yeah, im only 23 years old so hopefully things will pick up when im done! Anyway, thats irrelevant, although hopefully a few of you are a little less hostile towards me now!

We owe 296k on a 370k valuation valued property. What is a good amount to offer? I have a sister on a disability pension with no outgoings who is interested, however can she get a loan on a pension?

Also, If I do find a way to buy him out will i have to pay stamp duty on his half? And if my sister buys the other half will she have to pay stamp duty and what amount is it calculated on? I heard that relatives may be able to get around stamp duty? I had a look at the duties 2000 act for vic but its a little confusing. Also if a friend buys him out what amount will they pay stamp duty on and are there other costs involved?

Thanks so much for every single response. I am already looking at it in a different light!

 

[jane1111]

this can occur in many scenarios Many yrs ago 2 siblings owned a property and the brother wanted out. . The sister had alot of stress buying him out but has since earnt a fortune from that property which remains her main income. I hope things work out for u .

 

[Macca]

Hi RJD,

I think it would be worth contacting one of the mortgage brokers who visit here.

There are some in Melbourne and they will have had similar cases to work through before and will look at your finances and your sisters finances and see if they can help you.

 

[RumpledElf]

No stamp duty transferring between spouses but your sister would get slugged.

Who put up the deposit and initial costs for this house? Take those into consideration when you're halving the amount the house has appreciated by. You might need to go back to your solicitor to get the settlement statement so you've got the fees you paid handy to refer to.

 

[Lamingtons]

After the ex is forcing the sale of an IP, you want to go through the same thing with your sister?
Imagine if in a few years she needs to sell??

 

[Simon]

Make him an offer to buy him out. Offer on the lower side and explain that this will save agents fees, time etc.

Unless your income is now such that you can't afford to buy him out.

Maybe you might be better off washing your hands of the deal and of him. Take the lump sum you get from the sale and be able to start again when you are in an income position to do so.

Cheers,

 

[slumlords]

Hi RJDee1, If you need a broker I can highly recommend mine (if that's appropriate in this forum, sorry i'm new!). He is based in WA but has assisted us with purchasing our 6 properties in Qld over the past 3 years. I'm confident he could advise you about your situation. His name is Rhion Bennett: rhion'at'wcfa.com.au; www.westcorpfinance.com.au

Good luck!

 

[lizzie]

i'd talk to rolf latham on the forum here.

top bloke, knows his stuff and hard working for you.

 

[Perp]

I understand why some people are hostile at the idea of you trying to "force" him to retain half-ownership, but legally, I would think all the benefits are on your side, because I don't know how he'll sell the property without your consent. He could simply refuse to pay his half of the mortgage, but they'll still come after him - and it sounds like he's earning more than you right now, so that would be to his detriment.

Whilst he may want out, there may be some "win-win" outcome here, if he just wants his equity back. Say he owns $37K equity (half of your current $74K equity), and after selling fees plus a little bit of CGT (as it's been an IP for part of the time), he'd net, say, $30K.

If it's possible with regards to lending, do you think he'd agree to:

1) Refinance jointly to $326K, with all of the $30K extra cash released going to him - effectively paying him out for his equity.

2) He keeps his name on the title and mortgages so that you can have the $326K debt. Countering this - protecting his position - he has no cash left in the property anyway, having been paid out his $30K, and I think it's reasonable, to protect his credit, that you have a contract drawn up allowing him to sell the property if you go into default.

3) He gives you, say, 3 years to grow your salary and refinance into your name only, and take his name off both the title and mortgage. Effectively he's vendor financing you into sole ownership of the property.

The disadvantage for him is that having his name still on this loan may hinder his ability to apply for a new loan, unless he has great servicability; that very well may be a show-stopper for him. But given that you're really holding all the cards - in that legally, it's going to be difficult for him to change the status quo and force a sale - if he has reasonable borrowing power, he may be agreeable. The other risk to him is if you can't get a loan in your own name in 3 years, so you'd have to have a clause written into your contract (because all this definitely needs to be memorialised in a contract; not agreed on a handshake) that if you were unable to transfer the property solely into your name within 3 years, that you both agree to sell.

As I say, this isn't perfect, as there are a lot of "ifs and buts", but it's another idea for you to contemplate.

 

[marg4000]

Since you have lived together for over 2 years the law will consider you a de facto couple.

This means your partner can force a property settlement as the relationship has broken down, which would mean the courts could order the property sold.

I would avoid this at all costs.

If you can't afford to buy him out then selling the property and severing joint finances would probably be best in the long run. You both need to get on with your lives independent of each other.
Marg

 

[Jen_PFR]

Your post struck a chord with me. At 22 my fiance broke up with me, about three months after we had purchased a property together (in both names of course).

What did I do? Well, after drying my tears (at least the first ones anyhow!) I packed up my gear and moved back in with my parents. Not a lot of fun when I'd been living out of home for three years, but it was cheap! We had a tenant in the property, so he continued on, and my ex and I split the gap between the rental income and expenses 50/50.

I was happy with this for a time but after a while I wanted to disentangle myself from him - we'd both well and truly moved on, and I felt ridiculous owning a property with my ex-fiance at 23. I approached his mother (whom I had a very good relationship with) and proposed I buy him out, for $2K and payment of all settlement costs. (To put this into perspective, the unit we bought was $58K. This is back in 1997, mind you.) He was short on money (and perhaps short on brains also) and accepted, so settlement went through and I became the sole owner.

The profit from this unit (when I eventually sold it) went towards the purchase of my current property (which my husband and I bought together in 2005) as it covered the (substantial) stamp duty costs (about $25K). We've since gone on to own four additional properties. Basically it laid the foundations for our financial start in property.

And my ex? Well, he bought and sold another property, all before 2000, then went overseas to Japan for a couple of years and met his wife. When they came back, they found that they couldn't afford to get back into the market at the level they wanted to. I'm not a saint, every so often I think that this is some kind of karma after the way he treated me.

Anyhow, I just wanted to let you know that 'it does get better' and that your actions now can have a big impact on your life, even in 10 or more years' time. Good luck!

 

[lizzie]

i would agree with most of the posts here - either buy him out or sell and split the profit.

having joint partnership just won't work in even the short term, and definately not in the long term. write it down as an invaluable learning experience - you will have several of these as an investor.

when my ex and i split he paid me out in cash it was in the divorce documents that he had to refinance the properties he continued to hold into his name.

well, 8 years later when i went to buy ip #(whatever i was up to) the bank knocked me back because i was max out on the servicibility - BECAUSE HE HAD NOT REFINANCED! the properties were still in joint names.

a few phone calls later trying to track him down, i advised him that if he didnt get the refinance done within a month, i was still part owner then i would be seekiing half of the new and improved value ... this was now after the 2003 boom.

needless to say he refinanced very quickly.

get it out of your life and move on.

 

[Cazo]

i advised him that if he didnt get the refinance done within a month, i was still part owner then i would be seekiing half of the new and improved value ... this was now after the 2003 boom.

needless to say he refinanced very quickly.

get it out of your life and move on.

Lizzie - love your work

rjdee1, seriously I see what you want to work towards being a property holder, don't let this set you back. Take the advice on this forum to speak to a broker, even speak to an accountant about a PAYG variation if you want to find out about possible avenues to hang on to this without the ex's financial input. Regardless, cut your ties with him, even if you have to sell and then find something you can afford that might be smaller or even in a different State - but don't stay out of the market if you can help it. Good luck

 

[kathryn d]

Would your parents be able to cosign on the mortgage, if you paid your ex out?

 

[rjdee1]

thankyou very very much to everyone, you have all been of great help to me and i appreciate all your time and input! Im trying to negotiate to buy him out now as I found out that some lenders will take 80% of my rental income into account. I told him he wouldnt have to pay cgt, but after reading this it looks like he may have to, which means ill have to pay that for him too if he excepts my offer. Does anyone know how this would be calculated considering we lived there for two years then rented it for one year? Is there no way i can just buy him out and be completely responsible for the CGT when i sell the property?