Your advice, more personal than business...

[Blow-Me]

If 2 people went 50:50 on buying a property.

One of those lived there and the other didnt.

When it comes to sell would you expect to leave the deal 50:50 INC the CGT the person NOT living there would have to pay or just 50:50 of the sale price of the house.

Just asking what the 'norm' is if there is one in this situation?

Anyone offer any advice?

[Faith28]

It depends on the initial agreement. Was the 50:50 arranged on a loan basis or investment basis. If it's a loan then assuming the one who lived in the property was the one who took the loan would pay back that loan.

If it's an investment then maybe they'd both get 50% of the final sale. Maybe I've misunderstood you though as it's not clear what the basis of their 50:50 venture.

[Blow-Me]

Sorry that doesnt read well.
2 friends both bought a property, paid half each. No contracts just agreement that they would spilt what ever thet made in half.

say the property is worth 100k - i'm guessing the person living in it will want 50k however the person not living in it will have to pay CGT on profit.

Would it be deemed fair (or would you think it normal) to spilt the sale price in half whilst taking into consideration the CGT payment that would need to be made and instead of one person taking 50k and one 40k they both walk away with 45k?

A friend is going to approach the person howver they have never mentioned the CGT that is payable just wanted to know if this was the norm.

Its not a loan, but an investment for both parties.

Thanks for your reply.

[Martin P]

Both walk away with 45K
It's fair that way, as it was 50:50 at the start
That's a personal opinion though

[movietub]

Short and perfect answer is stick to the terms of the written agreement you signed when you bought the house.

Unless this was a 'gentleman's' agreement??

[gmw65]

I would say that if a good contract was drawn up then the person not residing in the property would come away with a higher percentage, on the basis that the other party has gained an additional benefit from the property.
With some shared ownership deals you would pay part mortgage, and pay rent on the unowned percentage.

[Faith28]

Why do you have CGT if the premises were resided by one of the investors? I didn't think there would be CGT at all unless you are declaring this to the tax man for the 50% ownership of the non-live in partner.

If there is CGT then I would assume that the person residing in the property would have paid 50% of the rent to the one who owned 50% of it.

[Gotum]

Last time I checked 50:50 was still 50:50. I know it's a hard concept for a lot of people to stick to after the fact but integrity is indeed becoming a thing of the past.

Any obligations that the person who living there have should be kept separate as if they were simply renters during the time you owned the property. This would include a reasonable amount of rent that should have been paid into a shared pool to be split at the end of the deal. They should have also paid any utilities etc as they went.

A deals a deal and that sounds like it was 50:50 :)

[Faith28]

For example:

£100,000 value of the property.

Investor A owns 50%
Investor B owns 50%

Investor A and B decide after a period of time to sell the property.

It increases in value. The value is £150k.

Both still own 50% so each take £75k. But investor B did not live in the property so may have to pay CGT on his increase (£75-50 = £25k). Investor A doesn't pay CGT but should have paid rent to investor B for letting him stay in 'his/her half' of the property.

Speak to an accoutant first thing.

[Marzipan]

Will have a similar scenario coming up before long myself. It's fairer to say split the net profit, so £45k each - BUT - one party had the advantage of living there so would that not be taken into account? If the property had been let then both parties would have had an income from it but the fact that one party lived there gives that party an unfair advantage. In my mind that's all the more reason to split cost of the cgt between the two of them. All depends on what was agreed in the first place really.

[Faith28]

I would agree with marzipan...if rent wasn't recovered from the residing investor then perhaps sharing the CGT would be the way forward.

[Faith28]

I forgot to add 'if CGT is applicable' in my last post.

It's still not clear why you pay CGT on a property that is being resided by an owner.

[Marzipan]

The (part) owner who lives there won't have CGT but the other party will - my understanding is that it doesn't matter whether you own all of a property or just a tiny percentage, if it's not your main residence then you've got to consider CGT on the proceeds. I may be wrong though, haven't sold much yet!