Inherited a House with Siblings When One of You Lives There
This is a made-up example. The people, places and numbers are not real.
Who decides, whether you can buy a sibling out, rent for the one living there, court orders for sale, and a case settled in five months without court.
- Category
- Composite: probate where an occupier will not leave
- Property
- Two bedroom Victorian terraced house
- Area
- Kent
- Main problem
- One of two siblings living in the inherited house with no tenancy and no plan to move
- Time to complete
- 5 months
- Value added
- About £25,000
01The Situation
Ken Lusted died last autumn and left his two bedroom Victorian terrace in a Medway town to his two children equally. His daughter Joanne was the executor. His son Gary, 52, had moved back in nine years earlier, gave up full-time work to care for him, and was still living there.
Gary had no tenancy, no savings and no wish to leave. He paid the council tax and the bills but nothing else. Joanne needed to settle the estate, and no buyer would complete with Gary in the house. They had stopped talking except by text.
The house was worth about £352,000 as it stood. Apart from the house, the estate held £24,000 in savings.
02The Diagnosis
When brothers and sisters inherit a house together and do not agree, it comes down to four questions: who decides, whether one can buy the other out, whether the one living there pays rent, and whether a court can force a sale.
Who Decides: the Executor, While the Estate Is Being Sorted Out
Until the estate is wound up, the house belongs to the executor to deal with, not to the children. The executor has the power to sell, and does not need the beneficiaries to agree. The rules in the Trusts of Land and Appointment of Trustees Act 1996 that make trustees consult beneficiaries, and let them ask the court for an order, do not apply to executors (section 18 of that Act). A beneficiary who thinks the executor is acting unfairly can ask the court to replace them, but that is slow and costly.
Once the House Is in Your Joint Names, the 1996 Act Applies
If the executor transfers the house to the siblings together, they hold it on what the law calls a trust of land. Then any of them can ask the court for an order for sale under section 14 of the 1996 Act. The court looks at what the person who left it wanted, what the house is for, the welfare of any child living there, and the wishes of the owners by size of share (section 15). Where one sibling wants their money and the other just wants to stay, the court usually orders a sale. Expect the court fee of a few hundred pounds, then often £15,000 to £40,000 in legal costs each if it goes to a final hearing, and often 9 to 18 months.
Buying a Sibling Out
One sibling can buy the other's share, from the estate before the house is transferred, or from the other once it is. The usual starting price is the share of today's value, less a share of the selling costs saved. Here that was about £176,000 for Joanne's half. Gary had no income to borrow against, so this route was closed. If you can do it, the buyer may owe stamp duty on what they pay, so ask a solicitor first.
Rent from the One Living There
Gary lived there with his father's permission, and that permission ended when Ken died. The estate could have charged him a fair rent for living there since, about £1,350 a month for a house like this, or taken that from his share. If siblings own the house together and one lives there, the 1996 Act lets the owners set conditions, including a payment to the one kept out (section 13). A court will often order the one living there to pay rent where the others were kept out.
No Empty House, No Sale
A buyer, and any buyer's lender, needs the house empty on completion. Anyone aged 17 or over living there is normally asked to sign the contract, agreeing to the sale and to leave by completion.
The Court Route to Get Him Out
The executor can ask the county court for possession. If Gary fought it, that could take 6 to 12 months and £10,000 to £25,000 in legal fees, mostly paid by the estate, so half of it by Joanne.
Gary Had Claims of His Own
A child who has given up work to care for a parent can ask the court for reasonable provision from the estate under the Inheritance (Provision for Family and Dependants) Act 1975. The deadline is six months from probate. If his father had promised him the house and he had relied on that, he could also argue the house should be his (a claim known as proprietary estoppel). Either claim could freeze the sale. He could also have held up probate for six months at a time by entering a caveat at the probate registry.
Tax on Any Rise Since the Death
If the house sells for more than its value at the date of death, the gain is taxed. The estate pays 24 per cent if the executor sells. If it is sold after being transferred to the siblings, each pays capital gains tax on their own share of the gain at 18 or 24 per cent, after the £3,000 yearly tax-free allowance. A quick sale at or below the death value means no tax.
03The Value
The problem was where Gary would live, not the house. Once that was solved, it was an ordinary probate sale with a fixed completion date.
Three similar terraces nearby had sold for £345,000 to £360,000 in the last year, so the house was worth about £352,000 as it was, to a buyer prepared to wait for a chain and an empty house. Redecorated, with new carpets, a new boiler and a tidied kitchen, it would be worth about £385,000.
A cash buyer priced it like this:
- Worth after the work, £385,000
- less the work, £14,000
- less stamp duty at the higher rates, about £22,200
- less legal fees, about £1,800
- less their margin for buying a house with someone still living in it, about £25,000
That gave £322,000, about 8.5 per cent below the as-is value, and below the value at Ken's death, so no tax on a gain.
Joanne then did the estate's sum for the court route. A possession claim, perhaps nine months, £15,000 in fees, a sale at £352,000 less the agent's fee of 1.5 per cent plus VAT (about £6,300) and nine more months of upkeep. If Gary brought a claim under the 1975 Act, both sides' costs could add another £20,000 or more. At best the estate would net about £330,000 a year later. With a 1975 Act claim it would be nearer £310,000, and the family would be split for good. Selling at £322,000 in five months, with everyone agreed, was worth more to both of them.
04The Execution
Weeks 1 to 3: the Numbers on One Page
Joanne's solicitor drew up an estimate of the estate: house and savings, less the funeral (£4,600), the probate fee, the legal costs of the estate (£4,200) and the sale. Gary's share came to about £166,000 at the cash price. With it, he could buy a one bedroom flat in the same town outright. Showing him three flats at around £160,000 did more than any letter.
Week 2: His Own Solicitor
The estate paid £750 towards independent advice for Gary. An agreement signed without advice is much easier to undo later.
Week 3: One Meeting with a Mediator
A family mediator met them together for half a day, about £600 split from the estate. It was the first time in months they had talked about anything but the house.
Week 4: a Written Agreement
Both solicitors drew up a short settlement agreement, costing £2,400 in all. Gary agreed to the sale, to sign the occupier's consent in the contract and to leave on completion day. He gave up any claim under the 1975 Act and any claim that the house had been promised to him. Joanne gave up any claim that Gary owed the estate rent for the months since their father died, about £8,000 by then. The estate would pay part of Gary's share early, for the deposit on his flat. Gary kept paying the bills until completion.
Weeks 5 to 8: a Buyer with a Fixed Date
The house went to cash buyers whose mandates covered probate sales. One viewing, arranged with Gary, and an offer of £322,000 on condition the house was empty on a set date eight weeks after exchange.
Weeks 6 to 10: Gary's Flat
He found a one bedroom flat at £158,000 with 118 years left on the lease and a £1,100 service charge. He had never owned a home, so as a first-time buyer he paid no stamp duty. He exchanged on the same day as the house, with his £15,800 deposit paid from the estate's savings as an early part of his share.
Completion Day
The house sale completed at 10am. Joanne's solicitor sent Gary's balance straight to his conveyancer, and his flat completed by 2pm. The van moved him from one door to the other. The estate kept back £5,000 until the final accounts were signed off.
05The Outcome
Bought for
£322,000
Spent
£38,000 on stamp duty, legal fees, decorating, carpets and a new boiler
Worth After
About £385,000
Value Added
About £25,000
Gary moved into his flat near his work, owned outright, with about £5,000 left for furniture. The estate was settled five months after the first meeting, with no court claim. Joanne and Gary still meet for their father's birthday.
The Lessons
- While the estate is being sorted out, the executor decides and can sell without every sibling agreeing.
- Once the house is in joint names, any owner can ask the court for an order for sale under section 14 of the 1996 Act. It works, but it is slow and costs both sides.
- If one sibling lives there, work out where they will go before you put it on the market, and decide early whether they pay rent.
- Show the occupier what their share is worth and what it can buy. Real flats at real prices change minds.
- Know the occupier's possible claims, including the 1975 Act's six month deadline, and settle them in the same agreement. Pay for their own advice so it sticks.
- Exchange the occupier's purchase on the same day as the sale, so they move straight from one home to the other.
- Avoid court if you can, and check your own position with a solicitor.
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