Develop Duplex with Parents

Hello,

I'm looking to buy an old house that would be eligible as a duplex site within the rules of my local council. The plan is to knock down rebuild and subdivide with me living in one half and my parents the other. It seems it would be better for the family to transfer the extra property to my parents rather than for me to keep it under my name once the build is finished.

I would fund the mortgage for the building site and parents are funding the build. Hoping to get suggestions on where in the process I can minimise CGT (for me) and stamp duty (for my parents) if possible.

Sorry if I've posted in the wrong forum and thank you for your help!

 

If you will be transferring after completion it will trigger duty and CGT.
You will not be able to borrow unless you are an owner of the property - unless you can borrow against other property.
A mortgage is security for a loan.
Look at bare trusts if your parents are able to get a loan.

best to seek specific legal advice.

 

Bare trusts are great, I did one through Certus Legal (RPI on these forums).

 

Thanks! Really appreciate the response. Unfortunately parents aren't in a position to be borrowing the money for the site from the bank. Hence why I need to apply for the mortgage. Seems like my only option is to transfer after subdivision

 

Will the title be unencumbered after completion?

 

Sorry I'm not quite sure what that means...we plan on splitting the costs down the line but mum and dad will be mortgage free and I will carry the initial mortgage that funded the site for my half. Not sure if that answers your question!

 

encumbered means there is a mortgage on title. If there is a mortgage you cannot transfer title until it is removed and this usually means paying out the loan. If the loan remaining will be less than 80% of the value of your unit, then you could transfer title of their unit to them once the subdivision has been completed and once you substitute security of the loan to your title, freeing up theirs.

 

Thanks for clarifying! Remaining loan will definitely be less than 80% as I will be paying the mortgage prior to us demolishing the place. I think given the land will be split into two titles per dual occupancy rules, where technically one half did not exist prior to subdivision, do you have any insights on how CGT would be charged? I thought about legally declaring I live in one half and my partner living in the other haha

My parents don't actually care about having a title in their name but figured it would be better in the long term as we are in a high income tax bracket and trying to net out in a better position for the future of the overall family.

Thanks again, really appreciate all your insights!

 

have a read of my tax tips on the forum - I have written over 300 on topics like this.

Then get proper legal advice.