JV MESS

[charmer56]

Hi Valued Rein Members,
I was wondering if someone could give me some guidence in this area or refer me to a lawyer or Mediator in Cochrane or Calgary that understands this predicament. There was nothing legally done as a JV partners. Both persons are on Title.

About 6 years ago a new house was bought in Cochrane. Both people put in $9000. and #1 qualified for the mortgage also. After a couple of years person #1 moved out to go to school and person #2 stayed in the house paid the mortgage, taxes etc. Any income that came from the basement suite was not divided over the years and i guess went to the mortgage. Some updates have been done by the person living in the house as they wanted them done ie. laminate, paint etc. Person #1 did not pay half of those costs but did also not have any input.

They now want to buy Person #1 out and think it should be a 70/30 split. There is $150,000. left on the mortgage and the house could sell for $440,000. being conservative
From what i have heard at REIN this does not seem right. Some questions?

Would the person living in the house need to have some of the money that went to the mortgage count as rent for themselves living there?

Would the income from the suite be equally shared or if it went directly to the mortgage, how does that work at this point?

Any ideas on how to resove this issue. The person actually living in the house thinks it is mostly their house as they have paid the mortgage etc. so it is not a 50/50 partnership. It is a touchy subject as it involves siblings and they don`t want it to cause a rift in their relationship but need help in being fair and also to understand the proper process.

I am not experienced enough to give advice so please give me your input.

Thank you so much in advance, Jayne

 

[RedlineBrett]

QUOTE (charmer56 @ Jan 27 2008, 09:47 PM) Hi Valued Rein Members,
I was wondering if someone could give me some guidence in this area or refer me to a lawyer or Mediator in Cochrane or Calgary that understands this predicament. There was nothing legally done as a JV partners. Both persons are on Title.

About 6 years ago a new house was bought in Cochrane. Both people put in $9000. and #1 qualified for the mortgage also. After a couple of years person #1 moved out to go to school and person #2 stayed in the house paid the mortgage, taxes etc. Any income that came from the basement suite was not divided over the years and i guess went to the mortgage. Some updates have been done by the person living in the house as they wanted them done ie. laminate, paint etc. Person #1 did not pay half of those costs but did also not have any input.

They now want to buy Person #1 out and think it should be a 70/30 split. There is $150,000. left on the mortgage and the house could sell for $440,000. being conservative
From what i have heard at REIN this does not seem right. Some questions?

Would the person living in the house need to have some of the money that went to the mortgage count as rent for themselves living there?

Would the income from the suite be equally shared or if it went directly to the mortgage, how does that work at this point?

Any ideas on how to resove this issue. The person actually living in the house thinks it is mostly their house as they have paid the mortgage etc. so it is not a 50/50 partnership. It is a touchy subject as it involves siblings and they don`t want it to cause a rift in their relationship but need help in being fair and also to understand the proper process.

I am not experienced enough to give advice so please give me your input.

Thank you so much in advance, Jayne

Hi Jayne,

It does sound a bit messy... this is why it is so very important to think these things through when they happen and put at least something in writing!

Anyways, it is what it is and you have to resolve it somehow. I`ll do my best to help but I have a few questions.

1. If I am to understand you correctly this was intended to be 50/50 six years ago... correct?

2. In what capacity is Party #2 on title? Did they co-sign the mortgage or do they have a caveat on there or what?

3. Party #1 took off to go to school, stopped making payments while still being on the mortgage, correct? How long ago was this?

4. Party #2 then collected rents from the basement suite correct? They didnt` give any of this to Party #1?

5. Can they prove that they put all of the cash from the rents directly towards the principle?

6. How much money exactly did Party #2 put into the property for improvements?

7. After Party #1 took off how was Party #2 affected? Did the rents cover Party #1`s costs? How much, if any was Party #2 `negative` per month after having to take on the burden of property management?

8. How did Party #2 get at their 70/30 ratio? What basis are they using to try for that number?

9. What is Party #1`s standpoint? are they still advocating 50/50 or what is their position? Did they have absolutely zero input and did they take zero action on the property since they moved out?

If you can do your best to answer those it will definitely help in trying to get to an amicable solution!

 

[Thomas Beyer]

good news: there is value .. many options:

option 1: forget the past ! sell the house, and split the proceeds 50/50 !

option 2: agree to an arbitrator. Then both sides will present their arguments, and the arbitrator will assign a value split, say 30/70 or 55/45 .. this is a legal binding process !

option 3: one party buys the other one out .. with the understanding that if the buying party aims too low the other party can buy the "buying" party`s share (also referred to as a shot-gun clause)

option 4: do nothing .. wait until one party wants to sell .. then both have to agree since both are on title

option 5: hire, for a small fee, an independent lawyer or business evaluator, or agree on a neutral 3rd party (maybe your dad or aunt), who hears both stories and then suggests a course of action

option 6: write up a JV contract that both sides can agree to

the person living there "for free" should have paid appropriate rent, but may have done so by fixing things, pay the mortgage, cut the grass, paint things ...

 

[terri]

hi Jayne, don`t know if this helps but my mom and her sister inherited a house together, my aunt lives in it and pays all the bills (there in no mortgage), she also pays for all the renovations that she decides to do to improve it for herself to live in. They jointly have paid 50/50 for repairs that were neccessary, and both agreed on it before hand. They each own 50%.
The situation you are describing is problematic because they did not discuss and agree upon things in advance. It sounds like they need to sit down and work things out amongst themselves. I`m not an legal expert so I can`t really comment on their situation, just give you an example of how others handle a similar situation.

In my opinion, not that it means anything, they would own it 50/50 because it sounds like that was the original intention at the time of purchase even though there is nothing in writing, but partner #2 should be rebated for a few things:

1) their cost to improvements that they did that increased value, as well you need to take into consideration that they probably took better care of the property that a renter would have, therefore, saving repair costs, or repainting costs etc that would have occured with regular renters

2) 50% of all repair costs that were neccessary repairs and not cosmetic upgrades

3) 50% of any monies that were paid monthly that were over and above what they would have paid to rent a similar property after the basement suite was factored in to the equation. Now on the flip side, if it cost them less to live in then they would have paid in rent to live somewhere else then that should be taken into consideration as well.

4) possibly a small fee for property management but since it wasn`t discussed in advance ,then maybe not, maybe they managed the property for free.

don`t know if that helps,
maybe others will have more ideas.

Terri