Tenants in Common in Equal Shares to buy out share - Mother & Daughter Dispute

[Janice]

I am a tenant-in-common in equal shares of property in Sydney with my daughter. The property was purchased in March 2005 and is presently unencumbered. The purchase price was over $700K.
My daughter left the property in May 2005.
My daughter’s ex-boyfriend was the mortgage broker and insisted on her name going on the mortgages and tenants in common in equal shares on the title.
There were two mortgages in both names. I also had the proceeds from a previous property used to purchase this property. I paid one mortgage from March 2005 and fully paid the two mortgages from January 2011 until discharged.
My daughter only contributed to mortgage repayments towards the sum of $49,155 and $1,053 of expenses between March 2005 and January 2011 for one mortgage only.
I contacted my daughter in October 2020 to buy her share out, so I can use the equity and move interstate. We have been in negotiations with our Solicitors for over 12 months to do a Deed of Settlement. My daughter & I agreed on her receiving 12% of a valuation.

Her Solicitor will not remove the following from a draft Deed of Settlement:

The parties acknowledge and confirm that NAME held her 50% share in the property from the date of the registration of title until the date of this Agreement, 12% to herself and 38% as trustee to NAME.

I will indemnify and forever keep NAME indemnified in relation to any Capital Gains Tax liability assessed and imposed by the ATO over and above a CGT liability associated with a legal interest of 12% of the said property.

Obviously they would want the Deed of Settlement back dated to 2005.

I have a private ruling from the ATO this week confirming there is NO trust based on the draft deed, as no previous agreement was made in 2005. It also confirms that as per the title the CGT liability would be 50%, and I am not liable to pay her CGT liability.
My daughter refuses to apply for a Private Ruling.
Her Solicitor has now said they want me to apply for a 66G application.
My Solicitor is concerned that on the day the Judge may decide to award her 50% of a net sale price and I would be liable for her legal costs.
As I am elderly and all my money is in the home. I will have no access to any of the funds and nowhere to live, until this is sorted.
What options is there if all my money is in this property and I cannot access any of the funds, and I have nowhere to live?
I only want to buy her share of the property.
Could a Judge award 50% to my daughter on the day and I pay her legal fees over her total contributions of $50,208 and abandonment of all her responsibilities onto me from January 2011?

 

[Immismum]

Maybe you could agree to what she is after on the basis that she applies for a private ruling?

To look at it fairly, if she does have to lay capital gains tax on her 50% share, then rough figures, she has to pay CGT on 50% of that, so on 25% of the capital gain, and if she is in the top tax bracket, then she pays that at a rate of about 50%, so is paying 12.5% which is the entire amount of money she is getting from any sale of the property.

If the ATO insist that CGT is paid, then it would seem that the amount should come from the person benefiting from the capital gain, which is you.

If it was me, I’d be agreeing to her demand regarding capital gains tax, and that way you have access to the money and the equity in the house, and can do as you please. I wouldn’t be risking a court awarding her 50% of the value, especially if all she is after is not to be liable to CGT on a benefit that she doesn’t receive.

 

[Janice]

She absolutely refuses to apply for a private ruling.
We calculated she would have over $140K in her hand after her legal fees, her contributions and CGT is paid at 50% of valuation, as she is in the highest tax bracket.
She said she is doing nothing till I die.
I thought if the 66G application enforces a sale, there was a way of enforcing a transfer of ownership?
Thanks anyway

 

[Nighthelyn]

Dear Janice,

Check with your solicitor - your options are:

1. Negotiations and terms of settlement, maybe find a mediator to assist - you want something to happen, and the daughter doesn’t or wouldn’t. That puts you in a lesser bargaining position. But if you are desperate enough then for commercial decision you may have to accept their term even if it means less money to you.

2. S66G application - this is a court order forcing that the property be sold and each party gets paid in accordance with their ownership % - and lack of paperwork means your daughter gets 50%. This is heavily favoring to the daughter so it is more likely they do not actually expect you to proceed this way.

3. Adverse possession application - highly technical check with your solicitor - but if you are correct that your daughter has no involvement with the property and totally abandons you for >15 years it maybe something to explore.

There are a lot unanswered questions in your post - e.g. A. if the daughter refused to do anything with the property, then how did the mortgages on the property gets discharged without daughter’s signature? B. Would your daughter agrees to your position that she abandons and has no further dealing with the property for >15 years? C. Why would the other party even suggest s66G application - this is a very odd proposal knowing very well the costs involved - your description suggest you want something done but the daughter doesn’t want anything to be done. D. Why would your daughter seems to think that she would be in a more favorable position if she doesn’t deal with you at all - only thing I can think of - there is no paperwork and you don’t have a will stipulating daughter isn’t actually entitled to 50% of the property so if something is to happen to you daughter gets 50% rather than 12%. E. Why with all the possible costs and after a whole year of delay, you do not wish to finalise the terms of settlement on the basis of a disagreed amount of $14,000.00 which seems very small compare with the cost of ongoing delay or other ways to deal with this which is much more costly (adverse possession ~$10k and assumed no opposition; s66G at least $60k and daughter gets larger slice of the pie). It sounds like assuming nothing is missing in your post, it is a no brainer you must reach a deal with the daughter to move on as a least worst option.

Good luck!

-Nighthleyn

 

[Janice]

She absolutely refuses to apply for a private ruling.
We calculated she would have over $140K in her hand after her legal fees, her contributions and CGT is paid at 50% of valuation, as she is in the highest tax bracket.
She said she is doing nothing till I die.
I thought if the 66G application enforces a sale, there was a way of enforcing a transfer of ownership?
Thanks anyway

She absolutely refuses to apply for a private ruling.
We calculated she would have over $140K in her hand after her legal fees, her contributions and CGT is paid at 50% of valuation, as she is in the highest tax bracket.
She said she is doing nothing till I die.
I thought if the 66G application enforces a sale, there was a way of enforcing a transfer of ownership?
Thanks anyway

1. Will speak to my solicitor about that.
2. I have all the paperwork which she is agreeing that she only contributed $50,208
3. I’ll speak to my solicitor about an adverse possession application, this may be the way to go.

A. I received an inheritance and I went to the bank with 2 bank cheques and I discharged the 2 loans in 2013.
B. Possibly No, but I have all the records/statements showing I fully paid everything since January 2011
C. Even my solicitor does not know why, we assume her solicitor has told her she will receive 50% of the property automatically as per the title and I will pay her legal bill, or they are dragging it out for $$$’s.
D. I have every single piece of paperwork, she has confirmed the contributions paid by both parties are correct. She has willed the property to her husband/children.
E. I wanted this all sorted in 2020, but it’s gone on and on. Her solicitor refuses to delete the TRUST wording in the Deed (she has a 12% share and I hold 38% in TRUST for her). ATO has confirmed NO TRUST in my private ruling last week, as this needed to be done in 2005, and not 2022.
Also a clause that I am fully responsible for any CGT over and above 12% as long as I am alive. ATO confirmed her CGT is her issue, not mine.

Many thanks for your reply, you have covered a lot of options