Inheriting a house with siblings and how to sell it

Inheriting a house can be stressful, especially if you’re sharing it with siblings. This is because, in order to sell the property, all shareholders must give their consent. When people are in different financial situations, have different viewpoints or maybe don’t have a strong bond with their siblings, this may create tension.

The best-case scenario would be that all siblings agree to sell the property and they then split the money equally amongst themselves. Alternatively, if the property is in a good condition and can be rented out then all siblings can split the rental income.

Regardless of whether siblings are united or against each other when it comes to their views on the property, no one person can force the sale and an agreement must be reached.

It is possible for one person to sell their share of the property, either to another sibling or a third party, however, third parties are unlikely to want such a small proportion of a property, especially if it means sharing with warring family members.

In this blog post, we will be looking at what it means to inherit a property, the taxes you may have to pay, and how you can sell your inherited home.

What happens when you inherit a house?

When you inherit a house following the loss of a family member or friend, it becomes your responsibility to work alongside any other beneficiaries to ensure a fair outcome in accordance with the will.

If the house is inherited through a will trust, the property may be held in trust for the benefit of the siblings, with trustees managing it according to the terms set out in the will. This means that the siblings may not have immediate control over the property and must work with the trustees to determine when and how the property can be sold, kept, or distributed in accordance with the trust’s provisions.

Typically, the executor of the will is responsible for managing the estate, which includes the property. Handling inherited property can be complex, especially if you and your siblings have different ideas about what to do with it. Open communication and compromise are key to resolving any disagreements that may arise.

One of the simplest options, if all siblings are in agreement, is to sell the property and divide the proceeds according to the terms of the will. This allows each sibling to receive their share in cash, which they can use or invest as they wish.

However, if one sibling wishes to keep the house, they can buy out the others by buying their shares at market value. This option allows the property to remain within the family, while the other siblings receive their inheritance in cash.

Alternatively, some siblings may decide to retain joint ownership of the house and rent it out, sharing the rental income equally. This option can generate ongoing income, though it requires cooperation and joint decision-making on property management and maintenance.

In some cases, one or more siblings may wish to live in the inherited house. If this happens, they would need to agree on rent payments or other forms of compensation to the siblings who do not live there.

Ultimately, the course of action will depend on how the property is divided and the type of ownership structure the siblings choose moving forward. Whether it’s selling, buying out, co-owning and living in the property through tenants in common or joint tenants, it's essential that the arrangement is fair and agreed upon by all parties.

What’s the difference between joint tenants and tenants in common?

When siblings inherit a house, they need to decide how they will jointly own the property, either as joint tenants or tenants in common. These two types of ownership have important differences that can affect both decision making and the future distribution of the property.

Joint tenants

Under joint tenancy, all siblings have equal rights to the whole property. No one owns a specific share; instead, each sibling collectively owns the entire house. If one sibling dies, their share automatically passes to the surviving siblings, regardless of what their will says.

This right of survivorship makes joint tenancy a popular option for families who want to keep the property within the immediate family.

Tenants in common

In contrast, with tenants in common, each sibling owns a specific and defined proportion of the property, which may or may not be equal. For example, one sibling might own 50% of the property while two others own 25% each.

Unlike joint tenancy, if a tenant in common passes away, their share is not automatically transferred to the other owners – it can be passed down according to their will or estate plan.This structure provides more flexibility in ownership but requires a more structured approach to managing the property.

How do you sell as a tenant in common?

If all siblings agree to sell the property as tenants in common, the proceeds from the sale will be divided according to each sibling’s ownership percentage. 

For example, if one sibling owns 50% and two others own 25%, the sale proceeds will be distributed in those proportions. This method of ownership can accommodate different levels of financial investment or emotional attachment to the property. 

What if joint tenants disagree about whether to sell?

Disagreements about selling the property can be more complex under joint tenancy, as all decisions about the property must be made jointly. If one sibling wants to sell but the others do not, the sibling wishing to sell can apply for a legal process called “severance of tenancy.” 

This process converts the ownership from joint tenancy to tenants in common, allowing each sibling to own a defined share of the property.

Once the tenancy has been severed, the sibling wishing to sell can then move forward, potentially forcing a sale through legal action if necessary. Importantly, this change can be made with or without the other owner’s agreement, as long as property legal procedures are followed. 

Severance of tenancy gives each sibling the flexibility to control their share of the property, but it can introduce complexities if the other siblings are resistant to selling.

How to sell inherited property with siblings

When you inherit a house you have a few different options of what you can do, and it generally depends on whether or not the siblings as a collective can agree on what action they want to take with the inherited property.

Here’s a detailed breakdown of your options when siblings inherit a house together:

Buying other siblings out of the property

In cases where one sibling wants to keep the house, they have the option of buying out the others’ shares. This is common when one sibling has a sentimental interest in the property or sees long-term value in keeping it.

The first step is to agree on the market value of the property, which can be done through creating an average from three estate agent valuations, or using the probate valuation, to ensure that all siblings are treated equally.

If the buying sibling has the resources, they can buy the other shares outright. If not, they can apply for a mortgage or bridging loan to finance the buyout. 

If securing a mortgage is difficult, it may be possible for the siblings to agree on a private arrangement. In this scenario, the buying sibling pays a monthly fee to the others until their shares are fully paid off. It’s important to formalise this through legal agreements to prevent any future disputes.

Not all siblings sell their share

Disagreements are common in inheritance situations. If one sibling wants to keep the property while others want to sell, the sibling wishing to sell could choose to sell their share to a third party.

However, this can complicate the ownership dynamic as the third party would then co-own the property with the remaining siblings, often creating additional legal and financial complications.

In such cases, it may be beneficial to seek mediation or legal advice to explore alternative solutions that keep family relationships intact while resolving the ownership conflict.

Keeping the property as a rental investment

Another option to consider before selling is turning the property into a rental investment. If all siblings can agree, co-owning the property and renting it out can provide a steady stream of income while keeping the house in the family.

This option requires all siblings to work together on management, maintenance, and decision-making regarding tenants. It’s important to have a clear agreement in place regarding how the rental income will be split and how costs will be managed.

Renting out the property can provide time for one sibling to raise the necessary funds to eventually buy out the others. In the meantime, the rental income can help cover expenses such as mortgage payments, taxes and repairs.

Inherited property split between siblings & sold

If all siblings agree to sell the property, this is usually the simplest and most straightforward approach. The process is much like selling any property you own, and you can choose from several different methods (which we will discuss later):

• Open market sale: Listing the property with an estate agent allows you to reach a wide pool of potential buyers and possibly achieve full market value.

• Property auction: Auctions can result in faster sale but may fetch a lower price. However, this can be ideal if you need to sell the property quickly.

• Selling to a property buying company: Companies that specialise in fast home sales, like us, can provide a quick and hassle-free sale, albeit if we offer 10% to 20% below market value.

Regardless of the method you choose, the key challenge is ensuring all siblings agree on the asking price and are prepared to accept the final offer. If everyone is on the same page, this can be the easiest way to divide the proceeds of the estate.

Can siblings force the sale of an inherited property?

When multiple siblings inherit a property, conflicts can arise if one sibling wants to sell while others wish to keep the house. In such situations, it is possible for a sibling to force the sale, but the process can be complicated and may require legal intervention.

If you are in favour of selling the inherited property and your siblings are opposed, you have the option to apply to the court for an Order to Sell  under the Trusts of Land and Appointment of Trustees Act 1996 (TOLATA). This legal action, also known as partition action, allows the court to step in and decide whether the property should be sold. 

However, this is usually viewed as a last resort when all other avenues for resolving the dispute have been exhausted. Here’s how the process generally works:

While siblings can force the sale of an inherited property through legal action, it is usually best to explore all alternatives before going to court. Applying for an Order to Sell should be a last resort, as it can be a lengthy, costly and emotionally draining process.

Will you have to pay any taxes on inherited properties?

When you inherit a property in the UK with siblings, there are a few taxes that you need to be aware of, which will vary depending on what you decide to do with the property. The key taxes that could apply include Inheritance Tax, Capital Gains Tax, and Income Tax if you rent the property out.

Do siblings have to pay Inheritance Tax?

The executor of the will is responsible for ensuring that any Inheritance Tax owed is paid from the estate before the property or other assets are transferred to the beneficiaries. This means the beneficiaries, such as siblings, usually receive the property after all applicable taxes have been settled by the estate.

When siblings inherit a property from their parents, the property may be subject to Inheritance Tax, depending on the value of the state. In the UK, Inheritance Tax is charged at 40% on the portion of an estate that exceeds certain tax-free thresholds. 

However, there are key allowances and exemptions that can significantly reduce or even eliminate the tax burden.

If the estate’s total value, including the property, exceeds £500,000 (after applying both the nil-rate band and the residence nil-rate band), the excess amount will be taxed at 40%. 

For example, if the estate is valued at £600,000, £100,000 would be subject to the 40% Inheritance Tax rate, resulting in a tax bill of £40,000. This means the siblings would effectively inherit £560,000 from the estate after the tax is paid.

How much Capital Gains Tax do siblings need to pay?

Capital Gains Tax only comes into play if you decide to sell the inherited property at a later date. When you inherit the property, there is no Capital Gains Tax to pay at that point. 

However, Capital Gains Tax is charged if and when you sell the property and make a profit (i.e. if the property increases in value between the time of inheritance and the time of sale).

Capital Gains Tax is calculated based on the difference between the property’s value when you inherited it (probate value) and the price you sell it for. If the property has increased in value, the gain is taxed at either 18% or 28% depending on your income tax bracket.

Each individual has an annual tax-free allowance for Capital Gains Tax, which in 2024 is £3,000. This means you can subtract this amount from the gain before calculating the tax owed. 

Should siblings pay Income Tax?

If you and your siblings decide to keep the property and rent it out, you may also need to pay Income tax on the rental income generated from the property. The income will need to be declared to HMRC and each sibling will be taxed according to their individual share of the rental income.

You can deduct certain expenses from your rental income before calculating tax, such as maintenance costs, repairs and letting agent fees (if applicable). It’s important to keep detailed records of these expenses.

The tax rate applied to rental income depends on your personal income tax band. If you are a basic-rate taxpayer, you’ll pay 20% on your share of the rental income; if you’re a higher-rate taxpayer, you’ll pay 40%.

Do siblings need to pay Stamp Duty?

The good news is that Stamp Duty does not apply when you inherit a property. However, Stamp Duty may become payable if one sibling buys out the shares of others in the property or if you transfer the property to someone else at a later date. In those cases, Stamp Duty would apply if the purchase or transfer exceeds the Stamp Duty threshold.

How We Can Help

If you have an inherited house that you own with siblings but are unsure of what to do with it, then you have a couple of options.

You can sell the property on the open market through an estate agent or auction, or you could sell to a cash buying company. All of these options have their own pros and cons which we will discuss down below.

Estate Agent

The most common way of selling an inherited property is through an estate agent. An estate agent will undertake all of the work involved in a property sale in return for a cut of the final profit, known as a ‘commission’.

One of the biggest advantages to selling through an estate agent is that they will do all the hard work for you, such as creating a listing for your property and advertising it for you.

However, the downside to selling through an estate agent is that it is time consuming. If you are selling an inherited property, then chances are you want it out of your hair as soon as possible, and on the open market, time is not on your side.

You will need to book viewings at the property for potential buyers, decide who will book time off for viewings as well as making sure that any issues with the property are fixed and at the end of the viewing you may still not have a buyer and you will have to start the process again.

Selling through an estate agent also means that after you have dealt with the estate agency fees and taken time off work for viewings, you will still have other fees to pay such as legal fees and removal costs. These extra costs can add up and eat away at the final profit of our house.

Auction

Another route you can go down when trying to sell an inherited property that you share with your siblings is to sell through a property auction.

The auction house route is a less explored option although in recent months it has seen a surge in popularity.

The way a property auction works is that you agree on a minimum reserve price for your home. Multiple bidders will bid on it and once they meet the reserve price, the property will sell to the highest bidder.

The best-case scenario for an auction is that multiple buyers will be interested in the property and will be outbidding each other, raising your total profit.

A positive to selling through a property auction is that unlike the open market, a sale is much less likely to fall through.

If a buyer pulls out of a sale at a property auction, they will not only lose their deposit, but they will also incur fees.

However, much like selling through an estate agent, the biggest downside to selling through a property auction is time.

Once you have listed your property for sale, you will need to wait for the next auction which could be weeks or even months away.

Even after the auction is finished, you will still need to wait for the paperwork to go through which can end up adding an additional month or more to the whole process.

Another downside to selling through a property auction is that it is not done without cost. Auctioneers, much like estate agents, charge a commission in order to cover costs of marketing and selling your home.

Cash Buying Company

The best option for selling an inherited property is to sell it through a genuine cash buying company as they are able to ensure a quick sale.

Another positive to selling through a genuine cash buyer is that they will complete the sale in a time scale that suits you.

If this sounds like something you might be interested in, then look no further! At The Property Buying Company we are here to take the stress out of selling an inherited house that you own with siblings.

We are a cash buyer of houses who buy any house, in any location in a time scale that suits you! Plus, we cover all fees for you – even the legal ones!

We only require one quick viewing in order to make sure that our valuation is correct and as we are a genuine cash buyer, once you have accepted our offer, that is the amount you will get in full in your bank.

Additionally, our fantastic customer service team are experts at handling the tricky world of inheritance and probate, we can act as a go between for all siblings & hold your hand through the entire sale process.

We are also a member of the National Association of Property Buyers and The Property Ombudsman, as well as being rated as excellent on TrustPilot.

So, if you are ready to leave the stress of selling an inherited property behind you, give us a call or fill in one of our online forms for a free, no-obligation cash offer which we could have in your bank as soon as you choose…