Dear Quentin,
My husband and his brother inherited their family home. When they were able to take possession our son and his family needed a place to live. The brother was quite willing to let them move in and, in lieu of paying him rent for his 50%, my husband and I would be responsible for all upkeep, repairs, taxes, etc.
The house is probably 90 years old, and needed quite a lot of work before they could move in. We spent approximately $ 20,000 to make it livable. After 4 years the house caught fire and, with the help of a crooked contractor, it took another $ 30,000 of our money to repair all the damage.
Now, comes my concern. If my husband and brother had sold the house when they first inherited it they would split proceeds 50/50. It would definitely have been sold because we didn’t want to be landlords to anyone other than son. But now 6 years later, we have paid well over $ 60,000 in repairs and taxes. This amount is well over what we had planned on, but it was a chance we took.
According to old tax records the house was probably worth $ 45,000, and now is worth over $ 100,000, and growing. The future sale and split of the house proceeds was never discussed. My husband is all for splitting it evenly. I’m the one with the issue because of all the money we spent in improvements.
I understand his brother took nothing at beginning, and I’m all for his getting 50% of the original value plus some extra, but I just don’t feel like he should get half of the current value. The house would certainly never be worth what it’s worth now if we hadn’t done all the work on it. Unless the house continues to increase in value, we will never recoup our investment.
May I have your opinion on this problem? On paper, this makes me look petty but my mind is unsettled over this.
Upset Wife
Dear Upset,
You’re aggrieved that you walked into this money pit with both eyes wide open in order for your son to save money in the short term. It seemed like an attractive prospect at the time, and I can why: Your brother-in-law is easygoing, so why doesn’t your son and his family live in the house for a while and give it a new lick of paint when needed, a scrub-scrub here and a scrub-scrub there, and make sure it’s ticking over while your son lives there rent free. Everyone wins, right? Well, not quite.
You, your husband and your son and his family win. Your brother-in-law, alas, did not get much out of that deal. But being Mr. Nice Guy, he said, “Be my guest.” Literally. Why would he want to charge his nephew rent? He decided to forgo the money to be made from a potential rental property or quick cash for the sake of family. What’s the point in having a house if you can’t help other people out. Plus, it will be looked after. And it was. But then there was a fire.
“ ‘Your brother-in-law decided to forgo the money to be made from a potential rental property for the sake of family.’ ”
You don’t say how the fire started. Was the stove left on? Did faulty wiring cause it? Or did a power line fall on the house in a storm? If it was your responsibility to take care of the property while your son and his family lived there, you are accountable for those first two scenarios. Even if it was an act of nature, you are responsible for ensuring that the home is insured. Of course, the main thing is no one was hurt. Still, as you say, upkeep (and that includes insurance) is your department.
You don’t fare well in the renovation vs. free rent argument, but you also raise a hypothetical argument to support your case. You should receive more than 50% of the proceeds from the sale of the house because your brother-in-law and husband would have sold the house (maybe, we’ll never know for sure) had your son not moved in. It was worth $ 45,000 then, and it’s valued at $ 100,000 now, so given your $ 60,000 in repairs and taxes, he should be happy with $ 22,500.
OK, I’ll play that game. Let’s peel back another layer of wallpaper and say, “If their parents passed away when they were much younger, they would have sold the house at an even lower price.” Or, “If their parents lived to be 99 1/2, they could be living in the house in 2021, and maybe you would make out like bandits because you would never have paid money to Sam the Contractor and Uncle Sam.” Let’s peel away even more layers: “If no one was born, we wouldn’t have this problem!”
If you have to bend the laws of space and time to justify your proposal, it becomes a ludicrous scenario, and splitting the proceeds 50/50 doesn’t sound like such a bad idea, after all.
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