We plan to sell our home in the north of England over the next few months. We are in the fortunate position of having received verbal indications of interest from two different neighbours. We haven’t taken these discussions any further, but we had the house valued last year so have an idea of price. Saving on an estate agent’s commission is an attractive prospect, but what are the risks if we decide to go it alone?
Helen Curtis-Goulding, residential property partner at Fladgate, says the estate agent’s commission is a big consideration when looking at selling your home as their fee eats into any net profit you are likely to receive. It often dwarfs other professional fees such as solicitor and surveyor fees.
As such, selling your property direct to an interested buyer could seem very lucrative in that a private sale would mean no agent’s commission is paid. Coupled with this, you will not have endless viewings and would avoid the hassle of the property having to be ready to be viewed continuously.
The first practical point is that the homeowners in this instance had their property valued last year. The market has moved significantly since then, so there could be a real risk of underselling the property, even after saving on the selling agent’s commission. Any one buyer could be willing to pay more for the property based on their searches (online and otherwise) and selling agents’ particulars can often go a long way to attracting buyers. Without testing the wider market, the vendors may not be selling at market value.
It is also easy sometimes to downplay the role selling agents play in putting deals together, but as part of the process they fully vet a buyer’s financial ability to proceed on the agreed price. In this instance, it may well be awkward for the homeowners to ask the neighbours for financial evidence that they can afford the property. You could see a situation where the sellers have engaged lawyers and think they are moving along on the sale without a buyer being able to go ahead.
The scenario mentions two neighbours having potentially competing interests in acquiring the property and again having to select one of these may be tricky on a social level. Having a third party who is a step removed from this and who can vet the buyers, assess their ability to buy and ensure they are moving at the correct speed could be invaluable.
Hearing from your solicitor that the buyers are not progressing quickly and then having to speak directly to them or have your solicitor send stern emails may be less than ideal when you are living next to the person.
To summarise, it is always going to be a balancing exercise of savings versus having somebody manage the sale, which, if a seller is not used to the process, could prove extremely stressful, in what is already a highly emotional time.
Can I force my family to buy me out of our business?
I’m in the third generation of my family property business. My siblings and I are all directors and shareholders. I’ve had a falling out with them and I want to leave the company and be paid my share. However, they say they can’t afford to buy me out. What can I do?
Juliet Schalker, a partner in the dispute resolution team at law firm Debenhams Ottaway, says your two roles as shareholder and director are not linked and you do not have to be both. When you say you want to leave the company, I assume you want to relinquish your shares but also step down from your role of director.
In terms of resigning as a director, this is usually straightforward. Unless you have a director’s service level agreement or the company’s articles of association stipulate otherwise, you may resign from office at any time by giving proper notice to the company. You should bear in mind that once you have served notice of resignation, it cannot be withdrawn without the company’s consent.
Once you have stepped down as a director, your right to be informed about the company’s affairs and to inspect the group’s books and records will cease and you will also no longer be involved in any day-to-day management of the company. You will maintain your shareholder rights, however these are far more limited.
In terms of being paid for your share, that is going to come from selling your shareholding. This will require an accurate valuation of your shares so that you know what they are worth, as it will not be as straightforward as splitting the company assets. There may also be adjustments depending on whether the shares are minority shares or majority ones and tax considerations to take into account.
Your shares are transferable in accordance with the company’s articles of association. It is common practice for the articles of a private company to contain restrictions and other qualifications on its shareholders’ right to transfer their shares, so these articles will need to be carefully checked, ideally by a solicitor.
It may be that there is a requirement for you to offer the shares for sale first to your siblings, ahead of other shareholders. There may also be an option for the company to buy back the shares, but the company would need the cash available to do this.
The directors may have to approve any transfer of shares, so that may prevent sale of the shares to third parties if your siblings decide to frustrate the process. If your siblings are difficult about the share sale, you may be able to apply for a court order, but the outcome will depend on factors such as your status as a minority or majority shareholder, or whether the company or other shareholders have the means to buy back your shares.
Unfortunately, the process is unlikely to be a quick one, but making sure you do it properly is essential. Alternatively, you could consider stepping down as a director and away from any management responsibilities but maintaining your shareholding so that you can continue to receive dividends if the company remains profitable and dividends are declared.
The opinions in this column are intended for general information purposes only and should not be used as a substitute for professional advice. The Financial Times Ltd and the authors are not responsible for any direct or indirect result arising from any reliance placed on replies, including any loss, and exclude liability to the full extent.
Our next question
I jumped on the cryptocurrency bandwagon early on for a bit of fun and without particularly high hopes. I have benefited from a price rise post-lockdown and now have a fairly high-value portfolio. I’ve used my holdings to fund some one-off purchases and exchanged between currencies. I recently received a letter from HMRC claiming that I may owe tax. I’m worried I’ve done something wrong. If I have never cashed in my portfolio, am I still liable for capital gains tax on the potential sterling profit on my original investment?
Do you have a financial dilemma that you’d like FT Money’s team of professional experts to look into? Email your problem in confidence to email@example.com