ᐅ Extension to Parent House: Questions About Inheritance and Property Division

The question is when you would be able to pay out your brother. If that can only happen in 20 years at the earliest, I would seriously reconsider the whole arrangement. What happens if your parents unexpectedly pass away in 5 years? Then a solution will be needed, and finding tenants for an old, unrenovated house is also difficult. Whether your brother will want to invest in the property or prefer to sell is then a good question. Overall, you should ask yourself whether the house (including the parents’ home) is ultimately worth €600,000 (about $650,000) to you. That is, as of today, the price it will cost you. At some point, you will either have to pay your brother out, or you may own only a part of the house on half of the plot. You won’t be able to make decisions on your own, and ownership of the rest is uncertain (maybe your brother will need money at some point).

May I ask where the high cost for the extension comes from? Is the parents’ home also being renovated as part of that?

Michael187 schrieb:


Since we clearly preferred dividing the plot, we researched through several channels. Unfortunately, it cannot be subdivided.

Please send me the plot address by private message, I’ll take a look at it.

My parents are transferring half of the plot to me. From this half, I am paying my brother half (money), meaning a quarter of the total plot (€50,000). The other half including the house remains with my parents. This half will also be divided in the event of inheritance, whether with a profit or a loss (demolition costs). The idea behind this is that my brother will receive exactly the same amount as I do. No one owes anything to anyone.

Okay, but in the event of inheritance, each of you will own half of the parents’ house – your brother then cannot use it alone unless you renounce your inheritance share. Together, you could only rent it out.

Regarding Solution Approach 2
Why can’t the property remain owned by my parents?

If the parcel is not subdivided, it remains one land registry entry, but your name will be added alongside your parents’ in the land register. One parcel – at least two owners, probably three: you and your parents. The local and value-based allocation will then be shown in the division plan or the shares of the parcel will be listed as percentages in the land register. So you (after paying your brother) would own 50%, and your parents together the other 50%.

86bibo schrieb:
The question is when you would be able to pay your brother out. If that is at the earliest in 20 years, I would seriously reconsider the whole arrangement. What happens if your parents unexpectedly pass away in 5 years?

Inheritance can happen at any time. However, that is no reason to leave 1000m² (1000 square meters) (about 10,764 square feet) of building land unused for decades.

Then a solution must be found, and finding tenants for an unrenovated old house is also difficult. Whether your brother then wants to invest there or rather sell is a good question.

But it’s definitely not a hindrance. As a last resort, demolition would free another 1000m² (10,764 sq ft) of available building land.

Overall, you should ask yourself if the house (including the parents’ house) is ultimately worth €600,000 to you. That is the current price it will cost you.

No. He is paying €50,000 (about $54,000) for his building plot and €350,000 (about $380,000) for his house – that totals €400,000 (about $434,000). In the event of inheritance, another €75,000 (about $81,500) will come to him, mostly as building land (€50,000). To buy out his brother, he would then have to pay another €75,000, but would then have a total value (today) of €600,000 – for which he only paid €475,000. The "missing" €125,000 corresponds not coincidentally to half of the current estimated value, since he pays nothing for his inheritance.

Eventually, you either have to buy your brother out or you might only own a part of the house on half the plot. You cannot make decisions alone and it’s uncertain who will own the rest later (maybe your brother will need money someday).

The solution with the half-owned parents’ house is not very advantageous but can be elegantly resolved in the event of inheritance by renouncing one’s share. This should be discussed with a notary.

That anyone would acquire 50% of such a (parents’) house to use it as a rental property seems almost impossible – the brother’s half is more or less unsellable if the other owner does not cooperate. However, this is nothing unusual.

May I ask where this high amount for the extension comes from? Will the parents’ house also be renovated?

He is simply building a complete house for €350,000 – this is not a “extension” in the traditional sense but is built as a semi-detached house, only the existing house is from 1936 and the new one from 2017.

Best regards
Dirk Grafe

Dirk Grafe schrieb:
No. He pays €50,000 (about $54,000) for his building plot and €350,000 (about $377,000) for his house – a total of €400,000 (about $431,000). In the event of inheritance, he receives another €75,000 (about $81,000), mostly in the form of building land (€50,000 / about $54,000). To buy out his brother, he would need to pay an additional €75,000 (about $81,000), but then the total value (as of today) would be €600,000 (about $646,000) – for which he actually paid only €475,000 (about $512,000). The "missing" €125,000 (about $135,000) corresponds not by chance to half of the current estimated value, since he basically pays nothing for his inheritance.

In the end, the house actually costs him €600,000 (about $646,000), since if he built elsewhere, he would eventually inherit the €125,000 (about $135,000) and could then use it either to reduce his mortgage or invest differently. Of course, it's a bit more complicated because nobody knows how the value will develop, and the timing (whether he gets €125,000 now or in maybe 20 years) also has a significant impact.

I believe you that the plot has a great location and living next to your parents has advantages. But I would definitely not invest that much money in a plot that isn’t fully mine. Maybe I’m too pessimistic, but everyone here usually talks about fixed interest rates of 10, 15, or 20 years and the risks involved. In this kind of situation, there are many, many more unknowns.

Yes, there are similar cases every day where this is done, but 90% of those are renovations or extensions, where the total property value increases, often resulting in multi-generation homes. Those are usually much cheaper than building a new house. I also have two friends who built a second house on their parents' land. But here, it’s not about an extension but a new house that unfortunately is attached to an older building. So it’s not cheaper than a single-family house, but on the other hand, it has a part in need of renovation. There are many ways to handle it, but you should clarify these issues now—not 20 years from now.

Such "negotiations" create tension even in the best families, and honestly, there is only one fair solution for everyone, which would be buying out your brother. But since that’s not possible, a compromise must be found that satisfies everyone. As of today, it’s not a good solution for you or your brother. You receive your inheritance now (even if only partially), and your brother gets nothing—maybe only after he has paid off his own house. Meanwhile, you don’t know what will happen after your parents pass away to the land where your house is built. That’s not a solution for me.

Another scenario: What if you separate from your partner? Is your partner also involved in the investment? How would ownership be arranged then? What happens if a possible new partner doesn’t get along with your parents?

These are questions every home builder has to consider, but usually, liability is joint. Here, your partner would own half of an extension on land that doesn’t belong to you. If she’s completely out of the financing, she would end up empty-handed. She supports the project now but could eventually be left with nothing.

86bibo schrieb:
Ultimately, the house actually costs him €600,000, since if he were to build elsewhere, he would eventually inherit €125,000 and could either use it for additional loan repayments or invest it differently.

Nonsense.

If he builds a comparable property externally, the land costs him €100,000, the house €350,000, totaling €450,000.

In the event of inheritance, he would recover around €100,000 and end up at €350,000. I find it baffling how an engineer can’t understand this.

Of course, it’s a bit more complicated, as nobody knows how the value will develop and the timing (whether €125,000 now or €125,000 maybe in 20 years) also has a significant impact.

That has nothing to do with the fundamental consideration. The claim that his house costs €600,000 is simply absurd.

I believe you that the plot has a great location

It doesn’t. The price is far too low for that, especially by Krefeld standards. That price is easily exceeded in any village with over 10,000 inhabitants.

and living next to your parents also has advantages. But I would never invest that much money on land that doesn’t belong to me.

Repeating the same errors in reasoning will not lead to a reasonable outcome.

If subdivision is possible, the building plot belongs to him – end of story.
If subdivision is not possible, there is a subdivision plan, which is part of the notarized contract. This is a standard procedure that regulates individual ownership, which I have already described several times.

Maybe I’m being too pessimistic, but here everyone discusses fixed interest periods of 10, 15, 20 or more years and how much risk to take. In such a situation, however, there are many, many more unknowns.

This is the same legal situation as with any condominium in a multi-family building. So in your opinion, all condominium buyers are hopelessly naive risk-takers?

Yes, similar cases happen daily, mostly renovations or extensions where the overall property value increases and multi-generational houses are created.

With all due respect – you have absolutely no idea what you’re talking about. This happens every day, also with complete houses and it happens whenever subdivision is not desired or technically/legal impossible or involves considerable extra costs. This has absolutely nothing to do with renovations or extensions.

That is usually significantly cheaper than a new build. I also have two friends who built a second house on their parents' plot. But this isn’t really an extension, rather a new house which unfortunately is connected to an old one. So it’s not cheaper than a detached house but has an old structure attached that needs renovation. You can do many things, but clarify this now, not in 20 years.

This scenario simply does not exist. He has already explained that the houses are planned to be fully independent and that the parents’ house can be demolished. Presumably, there would be no building permit otherwise, which essentially means that each house can be demolished independently while the other remains. I don’t understand what is so difficult to understand – there are two houses standing side by side, connected only by a row of roof tiles and an attached layer of polystyrene insulation. Any architect can do that.

Such "negotiations" cause tensions even in the best families and honestly, there is only one fair solution for everyone, which would be paying out your brother. But that’s not possible, [...]

Who says the payout of the brother is impossible? I immediately have an idea how to solve that. And who says that this family cannot reach an agreement and that tensions are inevitable? There is over 1,000m² (10,764 sq ft) of building land available – they would be very unwise not to make use of that.

so you have to find a compromise that everyone is happy with. As of now, this is not a good solution for either you or your brother. You get your inheritance (albeit partially) and your brother gets nothing,

How can facts and information in this thread be overlooked so consistently and repeatedly? The brother is supposed to receive €50,000, which is clearly feasible for the original poster – is €50,000 really nothing?

maybe only after he has paid off his own house.

The brother is obviously at a different stage in life – that happens.

But you don’t know what will happen to the land where your house stands after your parents die. That would not be a solution for me.

The new house stands on his land. Keyword: subdivision plan! Part of the notarized sale/transfer contract! In addition, the land would pass to him by 50% in the event of inheritance, if your assumption were correct (which it definitely is not), so even then you would know exactly what happens to the land. How can this be ignored again and again?

Another scenario: What if you separate from your partner? Is your partner involved in the investment? What happens to ownership then? What if a new partner is incompatible with your parents?

Every homebuilder must consider these questions, but usually you are jointly liable. In this case, your partner would own half of an extension on someone else’s land. If she is completely out of the financing, she is the one who loses out. She supports this project now and ends up with nothing.[/QUOTE]

In the worst case, this will be individual ownership. In the land register, the parents and the builder are registered, depending on the situation possibly also their spouse/partner – two to four names. The land register records shares of value attributed to each owner clearly and unambiguously. This is not the best of all solutions, but it is legally clear.

Regards,
Dirk Grafe

We have set up this situation with a single-family house as individual ownership on a plot of land in Kaarst (so not even far from Krefeld) together with the parents-in-law.

It works smoothly. The only issue is with the parents-in-law... that clearly has both advantages and disadvantages in every respect.

Dirk Grafe schrieb:
Nonsense.

If he builds externally in a comparable way, the land costs him €100,000 (about $110,000), the house €350,000 (about $385,000), so a total of €450,000 (about $495,000).

In the case of inheritance, he still gains roughly €100,000 (about $110,000), resulting in €350,000 (about $385,000). How an engineer cannot understand this is beyond me.

This has nothing to do with the fundamental consideration. The claim that his house costs €600,000 (about $660,000) is simply ridiculous.

Thank you for agreeing with me, even if you apparently don’t realize it yourself.

New build:
- €350,000 (about $385,000) house
- €100,000 (about $110,000) for a 500m² (about 5,380 sq ft) plot of land
Total €450,000 (about $495,000). Later, he inherits €125,000 (about $138,000), which he can use to pay off debt, ending up with the planned house on a 500m² (about 5,380 sq ft) plot for €325,000 (about $357,000).

“Extension”
- €350,000 (about $385,000) house
- this already includes the €125,000 (about $138,000) inheritance since he won’t receive it later
- upon death, to become sole owner, he would need to pay €125,000 (about $138,000) to his brother

That means he has paid €475,000 (about $522,000) and has already used the inheritance from the parents. Whether you add the €125,000 (about $138,000) here and compare it to the €450,000 (about $495,000) for the new build or offset the €325,000 (about $357,000) against the €475,000 (about $522,000) is completely irrelevant. The fact is that the whole thing is €150,000 (about $165,000) more expensive than a new build (assuming land prices are accurate) for 500–600m² (about 5,380–6,460 sq ft) of additional garden.

Regarding the payout, he clearly said that he can’t fully pay out his brother now. In my opinion, there is a significant difference between €50,000 and €100,000 (about $55,000 and $110,000).