Selling Property - Is our 15% equity always safe?

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jame$bear
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by jame$bear » Thu Jan 10, 2019 5:51 pm
Hello,

I'm 7 months into my IVA. Main creditor is HMRC and they added an 85% property equity clause in at month 36.

Our house is worth about 340k, 248k mortgage (which would be around 220k by month 36). I'm beginning to thinking I'm on a hiding to nothing, paying the mortgage with not a lot of hope for keeping the house when month 36 rolls around. Bankruptcy wasn't an option as I am a director.

And so I've been toying with the idea of us renting instead.

Would it be the case that if we were to obtain permission to sell early and pay 85% of our share into the IVA, that we would be able to keep the remaining 15%? Or would it be more likely that they'd want 100%? Indeed - if month 36 comes and we can't remortgage, the same question again really. Is our 15% safe at that point?

What's "normal"?
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Foggy
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by Foggy » Thu Jan 10, 2019 6:00 pm
Unfortunately HMRC landing this one on you isn't something we come across on the forum that often --- so we cannot guage "normal". But, I would have thought the 15% of the equity would be safely yours . Also check the exact wording as it should relate to only your share of the equity (presumably 50%).
jame$bear
Posts: 4
by jame$bear » Thu Jan 10, 2019 6:39 pm
Tell me about it. It's amazing how a large-ish but relatively manageable amount to repay to HMRC over 2 years spiralled into a huge IVA sum instead, after they wouldn't allow time to pay but such is life! My wife has entered an IVA too (interlocking or whatever it's called) as we are both 50% shareholders in our company.

I did see a post earlier today in response to a similar question which is what got me thinking, but since it is from 2012 I thought I'd ask fresh. It was:

by MelanieGiles » Thu Apr 12, 2012 10:10 pm
The answer to your questions depends on how the property was treated in the IVA proposals. If the house was specifically excluded, then it is yours to sell if you want to and the equity will be yours to retain. If you agreed to an equity release provision - which these days is highly likely - then the same calculations will prevail, but you should always be able to retain 15% of the value of your property at the point of sale, assuming you have the usual IVA protocol styled provisions.


The relevant mod from HMRC says says:

A professional open market valuation (RICS or similar) of the debtor's property shall be made at month 36 of the arrangement and detail provided to the creditors together with current mortgage statements at the time of the and no later than the supervisor's third annual report. In the event that the professional valuation of the debtor's property at month 36 demonstrates that the debtor's share of equity in all property is less than £10,000 (gross) the property may be excluded from the arrangement.

Where (gross) equity in the debtor's property at month 36 exceeds £10,000 the debtor must release 85% LTV share of the total equity. The net worth released shall not exceed a dividend of 100 pence.....


Also, I'm not sure how to read it... whether they are asking for 85% of the available equity following repayment of the mortgage or 85% of the value of the house. Because, if you flip it round, our 15% is either 15% of 350k or 15% of about 90k.

Usually quite bright, my brain doesn't seem to want to engage when I'm thinking about the IVA. :cry:
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Foggy
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by Foggy » Thu Jan 10, 2019 8:57 pm
It is a really badly worded clause !

I am afraid that the best way to get clarity would be to ask your IP for a "guide calculation" now, while you have time to prepare for the outcome.
jame$bear
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by jame$bear » Fri Jan 11, 2019 12:14 am
Thanks Foggy. That might be a good way to word it, rather than me start suggesting calculations myself. That way, if it comes back against me I can argue the case and haven't planted any seeds in minds!
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