After some opinions on wether to buy or not to buy

Hi everyone, I'm just after some opinions on what you would do in this scenario.

My inlaws own a farm about 10 minutes from the proposed badgerys creek airport 50/50 with one of their relatives. Their relative has lived on this farm for 10+ years without any extra monetary contributions.. (the inlaws have never lived on the farm) 8 years ago their relative built their dream home on the farm and have continued living in it.

The farm also has another house and a granny flat which they were renting out both parties receiving 50/50 rent up until mid last year when my wife and I decided to move in. After the tenants vacated and we started to get it ready for us the relatives decided they want to sell the farm and they want the rebuild price on top of the 50/50 figure which is over double the price they paid to build.


Now our concerns are..


do you think they're entitled to any extra money in this case upon sale? (For the build of their house)


My wife and I were considering buying into the farm with her parents as they don't want to let it go due to the future potential value being so close to the airport. However this week they received a letter stating that the new train station will be on the same road and the train lines are going through the front of the farm which will potentially mean knocking down of all the dwellings anyway. Should we try buying into it or avoid it?


And what's your opinion on buying out the relatives as an investment for future gains once the airport is built?

Or sell the whole thing altogether and invest elsewhere?

 

TBH it sounds like a mess.
Was any legal advice sought (and council approvals sought) before this building occurred?

The area has probably done its dash - developers have come in and seriously bid stuff up. They (through the local real estate agents) have been door knocking and letter boxing the area looking for people to sell for ages. You are looking at serious money if you are paying at market rates.

 

It is a huge mess..

No legal advice was sought before the build occurred and I believe they did go through council before the build

 

That whole issue would turn me off alone - it may be headed to legal action if they can't come to an agreement over it.

Other issues I'd consider:
- With the rail in front - is some or all of the property at risk of being resumed?
- What is the zoning going to be? I know there is a lot of land going to be zoned industrial around there.
- With a lot of the potential capital gains already priced in at current market values, are you in any position to develop it yourself? Zoning is important.
- What is the area going to look like - in terms of amenities, council planning commercial activities in the area? Do any of the current buildings fit into that or are they going to have to be knocked down and are only worth what they add in rent between now and then.
- If you did buy in, how much is stamp duty, can you get finance for part of the property and how would potential disputes (like the current one) be settled?
- What impacts if any will there be to the property from railway or aircraft noise?
Here's a tool for modelling noise Noise modelling tool

 

Obviously you need some legal advice and to talk to a lender. If it was me, I would want to buy half the farm, own the whole plot, and then you can sell in the future if you want or need to. Buying with in-laws could easily become a night mare scenario (or be brilliant).

The air craft noise and noise from the train line, plus traffic, need to be considered as well.

 

This does sound pretty complex. So the relative co-owns the farm?

I am not a lawyer but my understanding is that where you have joint owners, and one improves the property, they can claim either the improved land value (the extra you'd get for the land because it has that house on it) OR cost of the improvements (building the house in the first place), whichever is lower. But... (there's a bit but)

If one co-owner has improved the property by building a house on it, then an occupation fee/rent CAN come out of those improvement costs IF that co-owner is trying to claim for the cost/value of the improvements from the other owners.

I don't think they'd be allowed to keep the entire extra value of the house. This would be unfair because they voluntarily made an improvement, got all the benefit of living in it (it's not like your relatives could have moved in with them), and are now trying to get even more that it cost to build.

You'd need to find out how much value the house adds, and if it is lower than the build cost they'd get the lower amount (build costs 8 years ago might have been quite low, so we might not even be talking much here). Your inlaws can claim occupation rent to reduce their "share" of what they'd have to pay. The relatives don't own the house, your inlaws joint own the entire property and everything built on it.

So no the relative can't get double what they paid to build, they either get the added value OR what they paid to build (the smaller of the two) LESS occupation rent (which you'd have to get some professional advice on).

Again though, not a lawyer, and I might be way off here. It's a good idea to seek real legal advice.

 

To clarify they want the rebuild price? but double of actual cost to build the first place? i.e rebuild cost 350k but now they want 700k?

Who paid rates etc? both owners or the owners who lived on the property?

 

Hi all, Sorry about the late reply

finances we can borrow have already enquired about that. We don't know much about the zoning or what the area will be like once the railway goes in all i do know is that Some of the railway line will be across the front which means 2 or 3 dwellings may be affected.

yeap 50/50 - Thanks for that thats exactly what we have been trying to say after doing our research.

 

Yeah almost double the cost of the initial build price because it would cost more to build it today than it did 8 years ago....

They shared the rent 50/50 and the rates etc all came out of the rent. So both paid all the outgoings

 

Pft it tell them to jam it! As highlighter has said get advice and if its true about the whole occupation fee/rent then slap them with that.

For them to ask for double the build cost from the get go is totally unreasonable and only looking out for there best interest and not the right way.

 

if it was up to me i would've said a lot more than that lol thanks