Browse Forums Building A New House 1 Feb 26, 2013 11:12 am Hello, I'm new here and we are looking at building a home. One possibility for us, which is potentially a great option, is somewhat complicated and we will need to get sound legal and financial advice. But since it's in the very early stages, I thought we may be able to get some less formal information from this site. This is the situation: My husband's uncle lives in an old house that he inherited from his parents. He owns it outright. He wants to down-size at some point, probably in a couple of years, because it's too big for him. He has never been married and has no kids. We have started discussing with him the possibility of us building a house, inclusive of self-contained granny flat, on his land (after knocking down the old house, of course). The cost of building the house we want to build (all-inclusive) would be about the same price as the value of the land. So, we would end up with 50/50 ownership of the entire thing, with an agreement in place to cover the scenarios of buying him out (his choice vs our choice vs something happening to him or to us like death). For him, he will get a brand new place to live which is more manageable than what he has now. He also owns something that is worth just as much as what he has now. For us, we will be living in a brand new place but the mortgage we will be repaying will only be half the size as if we went it alone. Obviously there are the "personal" considerations - what if he is not a good neighbour, what if we have a falling out etc etc. But those things aside, these are the financial and legal considerations that we have thought of so far. If anyone has experience or advice on any of these, or anything else to add, please do share!!! CGT: Given that it is his "primary residence" at the moment, I assume there would be no CGT implications for him either now or if we buy him out later? Obtaining finance: It sounds simple (and attractive!) to borrow the money to build the house only, but building on someone else's land will no doubt ring alarm bells with the banks. At the very least, they would have just a little trouble repossessing the house only, and not the land, if we default. But I have read that once the house is built, it becomes part of the land and hence we can't separate ownership of land and house. So, would the bank be satisfied if his uncle is co-signatory on the loan, and the title is in both names? From the bank's point of view, if we default, they can get the house sold and because we would own 50% of the house/land, they would get 50% of the proceeds (or whatever the debt is). Is that right? Title: How does a title work when it is 2 parties that own the house/land? Does it state ownership % or is this dealt with by way of a separate legal document? Making the arrangements stick: Would you do this with a contract? Stuff like that no rent is payable as long as he is co-owner, we pay all land rates, water, electricity etc, if either of us want out of the arrangement what provisions there will be for this? So as you can see, we have thought of a lot of issues so far - I figure there are a lot more to be considered too. Any input at all is welcome! (oh except nothing about doing business with relatives.... we already get the potential disaster there!) Re: Building a house on a family member's land 2Feb 26, 2013 10:57 pm This is a legal minefield. I recommend you get professional advice and fast. Re: Building a house on a family member's land 3Feb 27, 2013 4:53 am you need to seek legal advice. and also what about other family . what happens if he dies (sorry) and check out when you have legal documents whether you are all owners or tenants on common ( sorry just trying to remember what our solicitor was telling me) but above all legal advice is very important. and make sure you have wills too Re: Building a house on a family member's land 4Feb 27, 2013 9:43 am CGT, I believe you are correct but double check this. Finance wise, I can see two options: he signs as a guarantor, putting his property up for security or else, you get all relevant names onto the title and apply jointly. The latter is more logical, IMO. Title, no problem. I co-own property with my sister and it works the same for non-relatives too. You just need to work out what names are going on there and which method of joint ownership you want: joint-tenants: you all own the property in equal shares AND if one owner dies, their share automatically goes to the other owners. You cannot will your share to someone else. or tenants-in-common: can write explicit percentage shared and each owner can will/sell their share separately. I'd go with tenants-in-common, 50% uncle, you and husband 25% each. Decent legal advice can go into more detail of course, but it is certainly doable. As far as getting out of the arrangement and contract for who pays what joint bills, you can have an agreement drawn up and signed by a lawyer. I don't bother with my sister but I trust her; I don't recommend that for peace of mind though. Wills should reflect this agreement and are an essential part of the process too. It is possible, doable and could work brilliantly. The pitfall is if you and uncle disagree on something and cannot find a compromise. Take it to the legal folks and get confirmation of what you want to do and then go talk to banks to confirm they will be on board. Best of luck. HD Land settled May '14. Building the PD Hoffman39: 5/11=site start, 13/11=slab pour, 26/11=frame complete, 10/12=roof on, 12/12=bricking started. Blog: http://jyndeira.net/blog/ Hi everyone, Newbie renovator here, after some advice for combining our family room in the picture and the alfresco and make a larger family room. There is a flush sill… 0 4843 13 6578 I don't think you're getting a response because you are not quite clear on what the issue is. yep, the site is not level, no site is! but are you just building a garage?… 1 2250 |