One for the legal eagles - forcing the sale of a jointly owned house

[MeldrewsMate]

Several years ago I bought a house along with a friend, and we rented it out.
My understanding is that we are mortgaged on the basis of mortgagees in common.
We made about enough over the years to pay for the refurbs after the tenant(s) left, and enough to pay down the mortgage so that it is just about 10 grand higher than the market value.

Fast forward to the present day and we have fallen out, neither wants to buy out the other, and the interest only mortgage term ends in 2 years.
We are facing the reality of finding £10-15k more than the house is worth when the loan is called-in.
The house was bought for £105,000 in 2006, now worth about £85,000 with a £95,000 interest only mortgage.

The house has been on the market for nearly 18 months, with very little interest at £95,000 because my (ex) friend will not drop the price.

Here are the questions:
1. I believe an application can be made to the court to force a sale at market value - what is the name of that process?
2. If unsuccessful in forcing a sale, will I be allowed to pay just my half of the remaining mortgage when the loan is called-in?
3. How can I protect my creditworthiness if the other mortgagee defaults on his half?

I don't want to run up large legal bills but my credit rating is important to my present business, so it needs protection from another's potential default.
I am reluctant at this stage to approach the mortgage company for fear of them calling in the debt early; to be clear, the payments have always been on time and are up to date.

 

[blup]

How did it drop in value, can you address any maintenance or structural issues and bring the price up before you sell?

I’m no expert but a court order may be required or you maybe able to sell your share independently.

 

[motorbiking]

So it sounds like you had a small amount of equity at the start, you've taken the profits as you go or has this just been a terrible investment?

Your worse case is that you will need to apply to the court under section 14 Trusts of Land and Appointment of Trustees Act 1996

Trusts of Land and Appointment of Trustees Act 1996

An Act to make new provision about trusts of land including provision phasing out the Settled Land Act 1925, abolishing the doctrine of conversion and otherwise amending the law about trusts for sale of land; to amend the law about the appointment and retirement of trustees of any trust; and for...

www.legislation.gov.uk

Check your facts first
make sure you are both on the deeds and the mortgage and have an equal share. It's likely that the mortgage will hold you jointly and severally liable for the debt.

This might be resolved with a letter before action setting out that you intend to apply for an order to sell and seek costs.

 

[motorbiking]

I’m no expert but a court order may be required or you maybe able to sell your share independently.

Thats an interesting idea.

 

[MNW67]

My understanding is that we are mortgaged on the basis of mortgagees in common.

Just on terminology.

It probably means you own the house as "tenants in common". But the mortgage will usually be in joint names.

It sounds like a mess. I am more familiar with the situation before the 1996 Act. Negative equity sales were common back then following the house price crash of the early 1990s. It looks like you now need an "order for sale" from the court. They are usually used when one party doesn't want to sell at all. Going to court to get an order for sale simply to reduce the price sounds like an expensive process. I agree that a warning letter explaining the costs your friend will be liable for if you win might be the solution. He might end up having to pay more in costs than he would lose by accepting £5k less from the sale.

 

[MNW67]

Thats an interesting idea.

Who would want to buy half a house, though, and end up joint owners with an awkward beggar. Also, would the mortgage company agree to it.

 

[pete01]

Why dont you buy him out (if possible) and rent it out, the price will/should rise eventually

 

[pete01]

neither wants to buy out the other

Sorry missed this bit

 

[MNW67]

2. If unsuccessful in forcing a sale, will I be allowed to pay just my half of the remaining mortgage when the loan is called-in?
3. How can I protect my creditworthiness if the other mortgagee defaults on his half?

You will almost certainly both be jointly and severally liable for the mortgage. This means that if the mortgage term expires and they decide to call in the debt, then each of you can be pursued for the full amount outstanding. If you don't pay off the mortgage, the house can be repossessed and auctioned. If the amount it sells for is less than the amount outstanding, you would both be jointly and severally liable for the shortfall. But instead of calling the loan in, the mortgage company might agree just to keep extending. Or you could re-mortgage.

I would imagine that you would have to get the mortgage company's permission, in any event, to sell for less than the amount outstanding.

You might be able to get free advice from someone like National Debtline. Also, the housing charity Shelter give free advice, but I don't know whether they advise landlords.

Anyway, that's just a bit of information for starters. It sounds messy.

 

[Mottie]

Here are the questions:
1. I believe an application can be made to the court to force a sale at market value - what is the name of that process?
2. If unsuccessful in forcing a sale, will I be allowed to pay just my half of the remaining mortgage when the loan is called-in?
3. How can I protect my creditworthiness if the other mortgagee defaults on his half?

Go and see a solicitor. The first half-hour is normally free, so ask first. You will at least get an idea of the options available to you based on what you tell them. Make a list of what questions you need to ask and write the answers down in case you forget.

 

[blup]

.

 

[Murdochcat]

Did the conveyancing solicitor when you originally bought the property not recommend an agreement between you to cover this eventuality?

I’m now watching Newsnight on the BBC - it really sounds like this saga is going to continue as there is more untruths to come out

 

[motorbiking]

Did the conveyancing solicitor when you originally bought the property not recommend an agreement between you to cover this eventuality?

This would certainly have been a good idea. But often people don’t.

 

[motorbiking]

Who would want to buy half a house, though, and end up joint owners with an awkward beggar. Also, would the mortgage company agree to it.

I was being polite, since this is a real person’s problem. The bigger issue is the liabilities are greater than the asset and we assume there is no tenant bringing an income.

 

[Murdochcat]

This would certainly have been a good idea. But often people don’t.

A matter of mine bought a house in 1985 and he was advised to have such an agreement drawn up and did.

That’s 40 years ago