Family and Property - IT DOES NOT MIX!

[ritchie77]

As the old saying goes - do not mix business with pleasure (especially family)......

A little dilema has arose in my world - a house shared equally among 4 siblings is owned by 1 party with them all signing a finance agreement stating how much each put it, % etc....... This was approx 5-10 years ago now and the owner wants out - to use the equity to but own house......

Is the owner able to instruct agent to sell house and then divide proceeds amongst family members? It is likely there will be some element of trying to stop the sale - particulary by 1 sibling and I was wondering likely outcome/rights etc before further action is taken?

There is also options of buying parties out but this also seems very messy - ie who goes out, who moves in, what is MV, etc.......

So maybe best to sell up and dont mix business with family

Look forward to any comments.

R

 

[RPI]

An impending sale can be held up by lodging a caveat, form available at http://www.lpma.nsw.gov.au/land_titles/dealing_forms/manual_dealing_forms. If a decision to go down that route is made, it may help relations if the caveat is brought of the attention to the sibling conducting the sale. It will still be upsetting but less so than if a contract is signed and then the caveat is discovered before settlement.

You would be looking at legal fees at minimum of $400 an hour for this sort of matter, most likely much higher depending on who is instructed. The process is likley to cost eat tens of thousands of dollars of the equity up in costs, if it drags on or if the 4 siblings instruct separate solicitors it will be higher than that.

The cheapest option I could see would be to keep the lawyers out of it. That may go against my future economic interests but when lawyers involved in a multiparty family dispute get involved they tend to be the only ones not to leave the situation with bad feelings. Get a valuation (paid not Re) and if there is disagreement each party get a valuation and average it. Then use this information to decide whether to buy one party out or sell.

Even if paying a professional mediator is required this will be significantly cheaper.

However if no mutually satisfying resoloution can be found then legal advice is definitely required. Just be prepared to spend a significant part of the equity on it.

Above is information only and is not advice, nor should it be relied upon.

Good Luck

 

[buzzlightyear]

Owned by four siblings in equal share but owned by one party? Do you mean the property is owned by a company or trust with each sibling having equal shares of that entity?

 

[skater]

I'm not sure if I understand the question. Let me try.

What I think you are saying is that one sibling, lets call him Fred, owns a home in his name only, however all four of the siblings have contributed funds to help with the purchase.

Fred now wants to sell the house and distribute the funds to the rest of the family. Some of the others don't like this and would like to keep the property, however since it is in Fred's name, they have no say in whether the property is sold or not.

 

[Dazz]

It's great

We've mixed family and property in the last year and the results have been very pleasant for all concerned.

The key to ensuring it's ongoing success are that all members involved are ;

• Financially astute
• Mature in their outlook
• Not urgently wanting any major lifestyle spends
• Led by a strong individual whom all other parties unanimously agree is the leader
• At varying ownership percentages, and the leader has the greatest stake

Just like on this forum and in society in general....when everyone thinks they are equal, it all just turns to rats**t and descends into a squawking gaggle where nothing substantial is accomplished.


One of the best and easiest ways for it to go pear shaped is to go 50/50 or 25/25/25/25 amongst say brothers and sisters. Bound to end in tears.

 

[Mr. Fabulous]

One of the best and easiest ways for it to go pear shaped is to go 50/50 or 25/25/25/25 amongst say brothers and sisters. Bound to end in tears.

This is one of the reasons I am pushing so hard for my parents to set up a Testamentary Trust. I am quite worried about 'issues' arising after they pass away - not necessarily from the family members, but partners of family members.

Personally, I hope I'm just being paranoid.

 

[ritchie77]

Skater - you are exactly right! The owner (Fred) has it in their name however a finance agreement was signed by the 4 x siblings as they put funds in..... It seems too hard to now work it through and the other will not let Fred buy them out - so what to do??

Dazz - the 4 x siblings at 25/25/25/25 is what we talking about..... Should be easy but not working out that way as the owner wants out to buy a house.

Sorry if wasnt initially too clear but this is what we talking about...... Would one of the siblings then be allowed to lodge a caveat based on a finance agreement between the parties if they do not 'own' the property - they have merely invested some money into Fred buying and then leasing the property over the last 5 years??

R

 

[RPI]

Hi Ritchie
yes you do not need title to lodge a caveat, only to be able to reasonably justify the caveat. Your agreement should meet this.

Darryl

 

[skater]

Skater - you are exactly right! The owner (Fred) has it in their name however a finance agreement was signed by the 4 x siblings as they put funds in..... It seems too hard to now work it through and the other will not let Fred buy them out - so what to do??


R

OK, so if Fred is the legal owner, I would suspect that he, and he alone, would be able to make the decision as to whether or not he sell the property. Of course if there is a caveat placed on the property, he would have to pay that out, similar to if you had a loan on a property, but that would be the only thing holding him back.

One sibling can't (I don't think - I'm not a lawyer, so legal advice should be sought) simply decide that they won't let Fred buy them out, when they have no legal title to the property.

 

[Simon]

[*]Led by a strong individual whom all other parties unanimously agree is the leader
.

Guessing that's you Dazz?

 

[ritchie77]

Hi Ritchie
yes you do not need title to lodge a caveat, only to be able to reasonably justify the caveat. Your agreement should meet this.

Darryl

Thanks guys - so RPI..... does that mean any of the 3 other siblings (excluding Fred) can lodge a caveat or only Fred?

Fred as the registered proprietor would like to sell and then pay everyone out - however, can others lodge a caveat and request they are paid out prior to the sale?

 

[Mr. Fabulous]

Others can lodge a caveat. Why would the others demand to be paid out before the property sells? Do they think that money grows on trees and Fred has some sort of magical super powers that allow him to access funds he doesn't have? I'm quite sure a legal agreement can be written up that states that Fred must pay back the money to the others before purchasing a new property or something along those lines.

What is the reasoning behind tying Fred's arms behind his back like this? Does he have a history of being dodgy and shirking obligations? Seems like one or more parties are acting rather immaturely.

 

[FormerLurker]

Is it not possible for the 3 other parties to pool together and buy Freds 25% share out thus having 3 parties @ 33.333%? Also prior to doing this I suggest setting up a family trust and a firm written agreement of some sort to avoid this happening in the future.

Sadly a verbal arrangement often only lasts as long as it's in all parties best interests as soon as it isn't excrement+fan time.

 

[SYD]

As the old saying goes - do not mix business with pleasure (especially family)......

This was approx 5-10 years ago now and the owner wants out

R

So what was the intention 5, or was that 10 years ago when you entered into the arrangement? What was your end plan? Or were you thinking this type of arrangement can continue indefinately?

SYD

 

[ritchie77]

SYD - original plan was to maybe develop (STCA) however this has never worked out and property remains rented......

Recent changed plans were for Fred to live and pay rest out - however some family arguements have made this unlikely, and now one of the other siblings wants to move in (or really pay Fred out and then have the lion share as one of the other siblings is disabled and unable to sign/control - not entirely sure of this status).......

Fred thinks easiest way is to sell and ensure all parties receive what is rightfully theres - but only if they cannot be stopped by any kind of caveats/injunctions...... Not too sure how they work given the property is owned soley by Fred,,,,,

Thanks again for your comments

R

 

[FormerLurker]

SYD - original plan was to maybe develop (STCA) however this has never worked out and property remains rented......

Recent changed plans were for Fred to live and pay rest out - however some family arguements have made this unlikely, and now one of the other siblings wants to move in (or really pay Fred out and then have the lion share as one of the other siblings is disabled and unable to sign/control - not entirely sure of this status).......

Fred thinks easiest way is to sell and ensure all parties receive what is rightfully theres - but only if they cannot be stopped by any kind of caveats/injunctions...... Not too sure how they work given the property is owned soley by Fred,,,,,

Thanks again for your comments


R

I think Fred might be right - cut and run would be easiest in this case and be a final resolution in which at least everyone walks away with "fair" value.

 

[Mr. Fabulous]

Agreed. If others want to buy Fred out, then buy him out. If they can't, let Fred sell the place and the money goes back to the parties.

 

[ritchie77]

Fred is not really interested in selling his share as he still wants to live there..... Willing to send property to auction and bid (maybe against sibling?) to secure possession...... Only way to do this by the sound of it?!?

They originally advised it was ok for Fred to stay but now changed mind? Seems a bit of a hassle - so nobody wants to give in (families eh) so the best option for all parties is to sell!!

It is likely in the event it does go to auction that sibling will lodge a caveat and refuse to remove it.... However my understanding is Fred can serve lapsing Notice on sibling and take it to Court (pretty quickly) if need be to ensure fair result for all parties concerned!?

But any ideas on status if sibling tries to take the caveat further - don't think they have many rights but hey who knows?

Thanks for any further advice

R

 

[Simon]

Perhaps you could consider engaging the services of a professional mediator.

They would be a neutral third party with professional skills - will keep everyone on track and ignore petty bickering etc.

If an auction is what is needed then that person could organise it and let everyone interested bid, and counter bid until just one is left. Might be best done in writing to keep the "heated emotions" at bay.

Just an idea - in days gone by these mediators would settle many business disputes and save them court costs.

edit: just remembered - they were called arbiters and perhaps still are.

 

[RickF]

Ritchie77

My brother and I purchased our first property together 15 years ago. We both lived in it until he got married, moved out then I moved back to Melbourne. It was then a 100% IP. 7 years ago I got married and wanted to buy a ppor but with little savings considered selling to access my equity and buy a house. After some discussion my brother and I agreed to keep the IP, tap into the equity which I used to buy and then I repaid that equity+some to the original IP and since then we have continued building our portfolio.
We avoided CGT and other selling fees and the original IP experienced massive CG in the last 5 years which has benefited us substantially as the rent has gone from $190 pw to $360 pw in the last three years but that is the market.
Your property must have some equity in it so see if it can be accessed for Fred to buy his ppor under the agreement that it is repaid along with any costs once his ppor has some equity in it. Fred keeps his share of the original property. No one has to sell and no CG or selling costs are incurred. It worked for us by making it a win/win situation and although at the time I nearly insisted on selling my JV I am now extremely glad I didn't.