Family deals? be careful!
Should you deal family deals with property? Especially complicated deals over long periods of time?
I know of a man who had retired without much cash, but had a nice flat in a good location in Mumbai. In 1993/4 that house was worth Rs. 80L and he wanted some partial liquidity for the same. He had (has) 4 children so he offered the flat to anybody who wanted to buy it at a price of Rs. 40L. His condition was that he and his wife would stay in the flat till the end of their life – and would pay the maintenance charges, but would pay not rent.
His 2 sons could not afford to pay (you cannot borrow for doing such a deal) which meant his 2 daughters got a chance to participate in the deal. His elder son-in-law said anyway we are entitled to 1/4th so I will pay Rs. 30L and promise not to disturb you for your life time.
Good deal? I thought so too.
They were wondering whether this could be documented. It was difficult to document. So the old man (oops he was just 62 at that time) decided to make a will giving that flat to his eldest daughter.
To me it looked like a good deal (still does) and the old man and his wife are just now planning to move to a senior citizens home in Coimbatore. So this flat is likely to be empty from Jan 2019.
What did the eldest daughter miss out? Rent for 27 years. Not a small amount.
What did they get? a flat in one of the better Western Suburbs of Mumbai. Market price Rs. 5 crores.
Oops. It hurts. Hurts badly.
I know one of the sons has asked a lawyer for opinion. The lawyer’s junior told me. Yes, it was about the flat.
The eldest daughter is in awesome financial shape – she has real estate worth rs. 75 crores – apart from mutual fund, etc. The other children have less than Rs. 2 crores. There is no comparison. Sheer advantage of staying in the Gulf and Canada. She feels the animosity of her siblings! I can feel it too towards me, the UNPAID adviser.
What more did it cost the eldest son in law? I suggested a term insurance plan for Rs. 50L (in 2003!) with the old man as a beneficiary – the policy has now lapsed – it was for 15 years.
He has offered to pay the bill for both the senior citizens (old man is 89 his wife is 78) – and that is being estimated at Rs. 2 L per month including rent in a Geriatric care center.
Well……any suggestions?
My solution I will give in a day or two…oops they hated me for that!!
MD
If its not an inherited property but from the old gentleman’s earnings he can do as he wants, plus he has already willed it. So that’s one option.
Second option is equal share for all siblings– provided that the elder son-in-law is compensated for missed rent over these years by the other three siblings, adjusted for inflation.
Either ways, lot of unhappiness only.
Krish
The mentioned flat might be 50 year old now. Seriously, are there buyers for 5 Cr?
Sriram Jayaraman
My siluggestion is below:
The first son-in-law had loaned out 30 lakhs in 90s. We need to compute the present value of this loan based on some assumed interest rate which is mutually accepted. Assuming the prevent value of this is 1.6 cr. The 4 siblings need to share this as 40 lakhs each to close the loan due. One this is done, the flat can be sold and proceeds shared equally.
Narasimmamurthy
I wonder the present (structural) condition of the flat !!
subra
flat is already gone for reconstruction – and is a new flat now. Yes it has a market value of Rs. 5 crores
Raajesh subramanian
My suggestion is the eldest daughter should get 40% of the current value of flat + Reverse rental calculation of current rental value of the house by reverse depreciation / reducing the rental value for each month until 1993 to compensate the rental loss + Term life premium amount paid + Geriatric care cost which is getting paid- Which hypothetically comes to 80 – 85%% of the flat. Remaining 15% – 20% of the amount can be split for the 3 people.