Help!! Version 2.0 - Probate/Plot/Property conundrum...

[Mulberry View]

So, I'm trying to buy a building plot from my Uncle that is part of a property he has partly inherited (he's currently trying to buy out the other beneficiaries, but can't afford to on his own). We thought it would be a nice easy transaction, but in fact it has turned out to be filled with complication. Not least because there won't be a plot to buy until he's bought the main bit etc etc.

 

 

 

The upshot is, we've had the chance to buy the whole property, which is hugely nicer from the viewpoint that we'd be ultimately in control of all decisions and no uncertainty about lending money etc. We can put the new boundary where we want it. Here's the scenario...

 

It's a 1950's built 'country style' Bungalow standing in about an acre of mostly mature landscaped garden. The house as it currently stands is a little unconventional, it's liveable in, but needs modernising. It does have a felt roof, albeit pitched to about 25° (estimated), but looks to be in really quite good condition. It stands in an off-road location, not visible from the road at all, but it is located around 3 miles from the centre of the city that it's positioned in and in a desirable village. There is a slight concern with access and highways that may complicate the plans to add another dwelling, but we have some measures we can take to understand that better before we jump in. It's literally just outside the conservation area and within the development zone, so pretty favourable and with no TPO's. I have the deeds for it in front of me and certainly need some help understanding the restrictions it mentions, but it doesn't look hugely complicated. Who could I get to clarify these for me?

 

What I'd hope to do is sell my current property and buy this one. There is about a £25-40k difference between what we expect to sell ours for and what we can buy this one for. We're currently at about 30-35% LTV on ours and not tied in to our current mortgage. I anticipate borrowing to a similar level just to buy the property initially, then think about self-build funding a little further down the line. I know we'll face some challenges in trying to get a mortgage with the non-standard (I guess) construction, but we could agree to do the roof immediately I guess? It's a little heart-breaking to do that because if we re-sell the main property, the new buyers might well want to tear it all apart, including the 'new roof', which we'd have only done to pacify a mortgage lender. C'est la vie.

 

Ultimately, we'd still like to split off a building plot, build on that and sell the original property. We'd have to live in the main property for the time-being and may choose to renovate, partly renovate or sell it as is once we've split the plot off and figured where we'll live. Perhaps we'll stay in it until our new one is done or not, yet to be decided and partly dependent on raising the self-build funding. We might just rent somewhere else or live with family if we need to. We might consider caravan life, but we both work from home, so that's tricky!

 

I think the price we can buy it for would be at a level where we could remarket the property again (give or take a little) even with the plot removed for similar money, perhaps we'll have to have the roof tiled and do some light modernisation ourselves, but we'd end up with a cheap and very attractive plot (about half an acre, with some mature trees and completely secluded) for the net sum of next-to-nothing, depending on how clever we are with the process. I think our only interest in it is the building plot, I don't think we can make the existing property into what we want long-term when you take into account cost viability.

 

I'd really appreciate some moral support on this and help spotting potential pitfalls, I have to move quickly and either grab it or run. ?

 

 

[scottishjohn]

first thing is when you get this house/plot --work on house that is there --keep it for a year at least --so you can sell it on and have no CGT to pay ,as it is your dwelling

--selling it on and not lving in it long enough  will trigger CGT.

split title soon with any terms for access and road repair written in etc ,etc 

 

I would suggest splitting Title  FIRST and get favorable valuation on both --then when   HMRC come knocking later you are armed with an arms length valauation o fboth bits

.just bear ih mind if you value plot too low and you decide to sell it --you will be hit with big tax bill

 

 

Edited December 8, 2019 by scottishjohn

[Mulberry View]

1 minute ago, scottishjohn said:

first thing is when you bet this plot --work on house that is there --keep it for a year at least --so you can sell it on and have no CGT to pay ,as it is your dwelling

--selling it on and not lving in it long enough  will trigger CGT.

 

I would suggest splitting Title  FIRST and get favorable valuation on both --then when   HMRC come knocking later you are armed with an arms length valauation o fboth bits

.just bear ih mind if you value plot too low and you decide to sell it --you will be hit with big tax bill

 

 

 

Great tips there @scottishjohn. It's really a lot to get our heads around at the moment. But in the most ideal of worlds, we'd live in the existing house until our new one is finished enough to live in and there's not much stopping that from happening. It'd be lovely to be so close to the plot as we plan to project manage it ourselves anyway. It'll just be down to whether we can figure a self-build mortgage with enough headroom without having the existing house to sell at that point and with a (relatively modest) mortgage on it.

 

With no outlay as such for the plot, we can progress as fast as our income will allow towards getting it all split up and prepared for build at least.

 

As we'll by then be owners of the main dwelling, I assume we can sell the existing property for whatever it is valued at, irrespective of what we paid for it?

[recoveringbuilder]

We bought a property 3 years ago which was a cottage with 2 acres, we more or less immediately set about getting planning for a new house in the grounds, when this came through we fenced off the cottage and some land then put it on the market, it sold within a week and we moved into a caravan on site, the title was not split until we sold the cottage, no CGT as the money received from the sale of the cottage was used to do our self build which was then our main residence 

[Ferdinand]

You have not explained how probate comes in.

 

My only comment is that if some family members getting property (you) and others getting money is involved, then make sure that all transactions are at appropriate values to avoid any future resentments. Such can poison relationships.

 

Is there any reason you can't just increase your mortgage and buy the whole thing from the Estate,  perhaps with a suitable agreement in place with your nuncle?

 

F

[Mulberry View]

1 minute ago, Ferdinand said:

You have not explained how probate comes in.

 

My only comment is that if some family members getting property (you) and others getting money is involved, then make sure that all transactions are at appropriate values to avoid any future resentments. Such can poison relationships.

 

Is there any reason you can't just increase your mortgage and buy the whole thing from the Estate,  perhaps with a suitable agreement in place with your nuncle?

 

F

 

It's a good point, well made.

 

Perhaps I should contact the solicitor (the executor of the will) and start a conversation. My uncle is speaking as though the terms of the sale are up to him (and the other 2 beneficiaries), but I guess the executor holds the cards ultimately and is the right person to converse with?

[Ferdinand]

Do not forget that if the Executors agree, they could do eg a Deed of Variation.

 

Another point for you is that you cannot expect the whole family to kick their heels for months and months waiting for their inheritance whilst you get your ducks in a row.

[Ferdinand]

You also need family members on side ie beneficiaries.

[Mulberry View]

1 hour ago, Ferdinand said:

Do not forget that if the Executors agree, they could do eg a Deed of Variation.

 

Another point for you is that you cannot expect the whole family to kick their heels for months and months waiting for their inheritance whilst you get your ducks in a row.

 

If we don't buy it, I guess it'll go on the market and at that point we're really no different to anyone else that comes along. I suppose they could hope for a unicorn cash buyer, but what are the odds of that? I feel certain that the development potential doesn't extend past what we're anticipating, so whilst it's great for us, it's not an absolute golden egg.

 

If we need to get the beneficiaries on side, it'll probably boil down to how quickly we think we can get our 'ducks in a row', as you said, but providing we can get a mortgage lender on side (should have an indication of that tomorrow, as we already have a mortgage agreed in principle for what we were going to do, so the broker has all our details/credit checks etc) and put ours straight on the market (we're ready to do that, all bar a few small DIY tasks), we should be in a favourable position. Of the 3 of them, one is practically silent, wasn't expecting this at all and seems grateful for whatever/whenever it settles. One is my father who I don't have much of a relationship with, he lives in Asia is keen for the easiest settlement possible. The other is my uncle, who seems to support it and is, again, looking for the easiest resolution. There is nobody else concerned.

[Temp]

While its still in the hands of the executor there are a few legal issues to be aware of..

 

The executor has a duty to realise the most he can from the sale property for all the beneficiaries. If he thinks he could get more by putting it on the open market or auctioning it off he probably should. On the other hand selling to a family member at market value might reduce costs (no estate agents fees?) and increase the amount each beneficiary receives so that would be ok.

 

If the uncle is executor, beneficiary and potential buyer he probably needs to be squeaky clean in case another beneficiary gets upset later.

 

The tax man is also fussy about the value of property. They will accept valuations from estate agents BUT if the property eventually sells for more or less than the valuation they expect/allow the executor to revise the figures used for probate and pay or reclaim any extra IHT. The fact that it has "development potential" may increase the valuation that estate agents put on the property increasing IHT if applicable.

 

That said, I don't believe the executor is obliged to actually develop the property in any way - just get the maximum he can for it "as is".

 

Once the property has been sold by the executor any further development wouldn't be subject to these issues.