Sorry to hijack the post but I have also been asked by two co-habitees to draft a Will leaving their respective shares of house to their respective children but with a direction that the property is not to be sold by the trustees for up to 2 years unless with the consent of the other rather than a life interest. My questions are does a right to postpone sale for up to 2 years (or sooner if consent is required) provision of this kind constitute a settlement under IHTA 1984, s 43(2)(a))? And as soon as the condition comes to an end, either 2 years or with consent, is this a PET?
I do not believe they would succeed if the other co-habitee was still wanting to live there. However, the alternative would be to give the children an IPDI on the first death with independent trustees and power to terminate, or an IPDI limited to 2 years. Otherwise, put the half share into a discretionary trust, again with independent trustees, and appoint to the children within 2 years of the death.
I think that is a valid concern. While I don’t deal with the contentious side of things directly, my second hand experience is that the courts are not shy about ordering a sale of a jointly owned property where the proportions of ownership are not contested.
Property owners are increasingly penalised for their ownership. In general, these penalties are worthwhile when you have the benefit of living in a property. Where that is not the case, however, an willing owner faces a series of disadvantages over having that capital invested in some other asset.
This includes unrelieved capital gains that he cannot crystalize incrementally (such as with a share portfolio), property expenses relating to someone else’s use and enjoyment, exclusion from ‘first time buyer’ offers/mortgages when trying to get onto the housing ladder, and (most recently) a potential stamp duty penalty on the purchase of a property for their own use!
Given this trend, I think the court is going to be increasingly reluctant to force people to own property they do not wish to own, and the risk of an order for sale is a very real one.
Where property is jointly owned, it is held by the co-owners as a trust of land.
Upon an application to court for an order for sale, as one of the factors to consider the courts will look to the purpose of the trust.
If the original purpose was to provide a home for the original joint owners, and the survivor of them, who continues to live there, my understanding is that the courts will not normally make an order for sale. In such situations, a mortgagee will likely have a better chance of forcing a sale than would the beneficiaries of the deceased co-owner.
I suspect the example cited by Taurean might relate to situations where the joint owners are still living, which creates a different perspective for the courts viewing any application for an order for sale.