10 Comments Commercial law, litigation, contracts, IP, property law
ok...its pretty confusing!
He lives overseas and we bought the house in my name to get the first home buyer grant. We were going to buy a second house and utilise his grant down the track.
I paid the deposit and he paid the first 8months worth of payments till he basically caught up to a 50/50 situation. Every cent it cost to buy the house was taken into consideration as was the saving from the grant and split down the middle. There was no official agreement in place to protect me from liability or him, although my will stated that he owned 50% and if he died his share was to go to his son.
He ended up buying the 2nd house without me, therefore we are also disputing the fact he benefitted from 50% of my first home buyers grant and then 100% of his. We then paid everything 50/50 till we had a falling out and he demanded a stat dec outlining our agreement. I couldnt get it in time so he stopped paying. this was 2 years ago. 5months later he got a solicitor to try and bully me into signing a contract and letting him catch up on our original deal. i refused and have been paying ever since.
then i got a letter saying there was a caveat on the house and he had an interest in the property...
the equity we had wouldnt have paid the selling costs even though we had both contributed about 80k each.. he wants his 80k back, plus the 20k it cost him to get his solicitor to bully me and put a caveat on the house.
I dont want to sell the house yet, but i want this issue finalised, i cant sleep at night over it. I have been paying the mortgage by myself for nearly two years now and have spent some money fixing it up. It is finally worth more than what we paid for it, but i dont think its fair that he benefits from my hard work when he broke our agreement. He also wants interest on all his money...
Here is your legal postion.
Your brother has what is called an equitable interest in the property, this is not to be confused with the equity in the house, that is something completely different. What it means is that althou there is no contract and he is not on the title, if this matter went to court the court would decide he had a legal 'equitable' interest despite the lack of documentation.
In light of this I suggest you treat your brother as IF YOU GUYS HAD A WRITTEN AGREEMENT. In other words YES your brother has a right to his interest in the property but how to recoup that is somewhat tricky.
"But what about the fact he 'broke' the agreement?" I hear you ask. Well that doesn't change the fact he owns 50% of the property (a % that is reducing each day as you make payments and he doesn't)
What are your options? Refinance and pay your brother what you can raise, keep making the payments yourself and enter into a payment plan to pay your brother the rest, or sell the property to pay your brother, OR do nothing and force him to prove his equitable interest, which will be difficult for him. Do you value your relationship with your brother? If yes you should take options 1 or 2.
Thx Atikin, I really appreciate your advice
Firstly i find it difficult to value my relationship with my brother. I did. But dont now. 2ndly I didnt think i could refinance with the caveat on it?
And lastly, i made him an offer and he wont accept it.
This is what i offered.. I said i would get a valuation on the property as of the day he stopped paying, minus the cost of what it would have cost me to sell it at that time and then give him half of what was left. (In my estimation - not much)i said i wouldnt give him the money until i sold the house and i would sell it at my discretion and not be bullied into selling it just because he left me in the lurch.
Approximate figures involved.
Paid for house $280,000 (of which financed 270k).
After 5 years of us paying house was worth approx $290,000 (if that) and mortgage was down to $250k.
Out of that $40k balance we would have had to pay real estate commission, legals etc - i very conservatively estimated 10k for this leaving 30k. (prob more like 20k) I offered to pay him 15k cash to walk away. He said no first he wanted the full 80k he had paid in payments and the 20k he spent on the solicitor to put the caveat on and interest, he then said he would accept 80k.
Do you think i should pay him the full 80k? I think my offer was more than reasonable... if it went to court i dont think he would get more, in my mind i have been fair, am i kidding myself? Can not believe this is my brother..
Hi Kaillis, what would happen re the caveat is that there would be a settlement and the documentation to remove the caveat would be part of the settlement.
No I don't think you should give him $80k. If/when you sell the house as you have stated you will pay out the mortgage to the bank and retain only the equity. When you put $$ on to a mortgage you don't get it back dollar for dollar, you only get back what has actually been paid off the mortgage (equity). Once the entire mortgage is paid off, you still don't recoup what you paid b/c, as we all know, a $300,000 house will cost us twice as much due to the interest we pay. I know you already know all this but I'm spelling it all out so you will have something to go back to your brother with.
It has been a long time, but i need to revisit this issue as it causes me endless worry..
When Atikin you last responded, you initially said that he shouldnt get all of his money back dollar for dollar as it wasnt me loaning the money from him, it was him being a 50% share holder in the investment. But then in the next reply you said if i keep the propery i should pay him out dollar for dollar what he put it in even though there would be little to no equity in the house at the time he just stopped paying his share.. Can you please revisit this with me..:)