Here’s an interesting scenario for the mortgage buffs……

…..my mother in law owns three houses. One she lives in with her long-suffering husband, the second in a not too bad part of Reading, and the third stuck on a hillside in Wiltshire.

Both my parents in law are getting on a bit are are starting to think about inheritance. They have been advised by professional tax minimisers to gift two of the houses to their two daughters (one my wife) and hope that they outlive the seven year rule. Unfortunately my mother in law thinks that it will be more fun to split the ownership of one house: one third to my wife; one third to my sister in law; one third she retains herself. The added complication is that the house in question hasn’t been lived in for 20+ years and is falling down. The are no prospects in the short term of putting a tenant in to generate a rental income.

Can anybody see any benefits to owning one-third of an uninhabitable house? My mother in law suggests that we can use it as collateral to mortgage but I can’t see that any bank would like this arrangement – how would they be able to repossess one third should we default? As it stands this sounds more like a liability rather than an asset!

Any pearls of wisdom, other than don’t get involved!

Definite a liability on that basis – I get to deal with long term tenants, and when the original landlord dies and various children inherit a share of the property it is a nightmare for all involved.

Wouldn’t splitting ownership negate the IHT planning ? And cause potential aggro?

House still an asset. Mortgage a liability, the difference between the two, net assets

Liability.

Unless everyone unilaterally agrees to dispose of it.

All of the above, plus if it’s falling down it’s most likely un-mortgageable (if that’s even a word).

To be fair, “falling down” is a bit harsh. It’s structurally sound but would require gutting and a new bathroom, kitchen, wiring, plumbing, etc before it could be rented out. I’m up to my dropper post in debt so I’m not going to be financing the renovation any time soon.

As it stands it has some value – it’s a three bedroom detached house on a fair sized plot not far from the town centre. The council certainly think it is habitable as the council tax still has to be paid.