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    • RED28
    • By RED28 10th Jun 17, 6:06 PM
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    RED28
    Amending Declaration of Trust
    • #1
    • 10th Jun 17, 6:06 PM
    Amending Declaration of Trust 10th Jun 17 at 6:06 PM
    Hi,

    I need to amend an existing Declaration of Trust which was created to show how our the proceeds from our property should be split. (Cohabiting, unmarried)

    There is a Form A Restriction on the title deed referring to the Declaration dated xx.xx.xx or some variation thereof. I assume due to the wording 'variation thereof' the restriction can stay as it is?

    With regards to the new Declaration document itself, i intend on using the original one that was drawn up by a solicitor and tweaking it slightly to reflect the change in split of proceeds once the mortgage has been paid off.

    The Declaration has the statement:

    "This restatement supersedes all previous trust declarations, agreements, amendments, and restatements."

    Is this enough to show that is supercedes the old one or do i need to be more specific?

    Many thanks
Page 1
    • getmore4less
    • By getmore4less 10th Jun 17, 7:18 PM
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    getmore4less
    • #2
    • 10th Jun 17, 7:18 PM
    • #2
    • 10th Jun 17, 7:18 PM
    Why was it not written properly in the first place?

    The ownership never needs to change if done properly all that changes is the debt owed by each person as the mortgage gets paid off.
    • Pixie5740
    • By Pixie5740 10th Jun 17, 7:25 PM
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    Pixie5740
    • #3
    • 10th Jun 17, 7:25 PM
    • #3
    • 10th Jun 17, 7:25 PM
    You can't change it unilaterally. Is the other person(s) also in agreement with changing it? As getmoreforless says, done correctly a Declaration of Trust shouldn't need to be changed so perhaps you would be better off having a new one drafted rather than just tweaking the existing one.
    Annual income twenty pounds, annual expenditure nineteen pounds nineteen and six, result happiness. Annual income twenty pounds, annual expenditure twenty pounds nought and six, result misery.
    • RED28
    • By RED28 10th Jun 17, 8:11 PM
    • 20 Posts
    • 2 Thanks
    RED28
    • #4
    • 10th Jun 17, 8:11 PM
    • #4
    • 10th Jun 17, 8:11 PM
    Apologies for the confusion, the original was written properly to reflect the deposit paid by myself at time of purchase (2009) The agreement was I'd get my deposit back with proceeds split 50/50.

    The mortgage has been paid 50/50 since then but I have paid another lump sum off the capital. We have both agreed to change the trust to reflect the amount of equity held in the property, so we'd both have the same percentage return on our investment in the property.

    Because I have the original declaration of trust, I thought we could use that for the wording but just unclear on how to make it clear that this trust supersedes the 2009 one.
    • getmore4less
    • By getmore4less 10th Jun 17, 8:33 PM
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    getmore4less
    • #5
    • 10th Jun 17, 8:33 PM
    • #5
    • 10th Jun 17, 8:33 PM
    so you are changing the way you agreed from a

    A. "get your money back" or interest free loan to the OH.

    To

    B. some sort of more equity based agreement.

    That is going to get a bit complicated to do it properly best way is to do a virtual sale on the current deed terms then a purchase on the new deeds terms.

    First you need to do the virtual sale.
    you get your deposit back and you each own 50:50 whats left and 50:50 of the remaining debt that gives you your virtual cash for the next stage.

    You then do a virtual purchase where you buy your shares with your virtual cash and take out a new mortgage(really still the old one).

    You can then work out proper equity shares based on the cash and debt being serviced.

    Another option is to leave the existing agreement and just adjust the debt you each service going forward.

    eg if you have £100k mortgage being paid 50:50 if you pay off £20k of yours you now pay the £70k mortgage split 30:50 or 37.5% and 62.5%.

    Bit of a mess as you did not do a proper equity deed at the start that also covered extra debt payments.

    you are not alone it is very common to make these two errors, get you money back and no account of how to deal with the debt.
    Last edited by getmore4less; 10-06-2017 at 8:35 PM.
    • getmore4less
    • By getmore4less 10th Jun 17, 8:42 PM
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    getmore4less
    • #6
    • 10th Jun 17, 8:42 PM
    • #6
    • 10th Jun 17, 8:42 PM
    Should have also added if you want to go back to the start and reset the starting equity to accound for the deposit.

    You need to include all costs to buy the place in the cash inputs.

    If the mortgage is paid 50:50 the equity is cash+1/2 the debt.

    you then need to adjust any payments to maintain/improve at the new equity %.

    Then for the new cash input you need to revalue and workout how much you are buying if you want to keep the mortgage 50:50


    As you had the deposit and seem to have more cashflow perhaps consider changing the equity to reflect this going forward and free up cash for the OH.
    • RED28
    • By RED28 10th Jun 17, 9:24 PM
    • 20 Posts
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    RED28
    • #7
    • 10th Jun 17, 9:24 PM
    • #7
    • 10th Jun 17, 9:24 PM
    Thank you for your reply getmore4less.

    I have searched the threads and compiled many spreadsheets as to how to make the new Trust fair.

    Currently the situation is this (illustrative figures used)

    Purchase price = £200,000

    My equity = £70,000 of total £90,000 so 78%
    My Mortgage Liability = £55,000 of total £110,000

    Partners Equity = £20,000 of total £90,000 so 22%
    Partners Mortgage Liability = £55,000 of total £110,000

    The trust states:

    1. The parties hereto DECLARE that they hold the Property UPON TRUST to sell the same with power to postpone the sale and to hold the proceeds of sale (after deducting therefrom the costs of sale) UPON TRUST:
    (a) To discharge the Mortgage.

    (b) As to the balance, if any, to divide as to 78% for xxxxx absolutely and as to 22% for xxxxx absolutely.


    The percentages are correct as of now. In order to maintain the 78/22% split, the mortgage payments would also have to reflect this. Alternatively carry on paying 50/50 and revisit the Trust each year to reflect the updated share split. We would only be talking 1-2% unless another lump sum is made.

    This is what we have both agreed on but would welcome feedback.

    My main concern at the moment is clarifying the amendment on the document
    • getmore4less
    • By getmore4less 10th Jun 17, 10:42 PM
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    getmore4less
    • #8
    • 10th Jun 17, 10:42 PM
    • #8
    • 10th Jun 17, 10:42 PM
    Thank you for your reply getmore4less.

    I have searched the threads and compiled many spreadsheets as to how to make the new Trust fair.

    Currently the situation is this (illustrative figures used)

    Purchase price = £200,000

    My equity = £70,000 of total £90,000 so 78%
    My Mortgage Liability = £55,000 of total £110,000

    Partners Equity = £20,000 of total £90,000 so 22%
    Partners Mortgage Liability = £55,000 of total £110,000

    .......
    Originally posted by RED28
    Wrong at the start..

    equity shares are £125k and £75k so 62.5% 37.5%

    if you service debt you own that bit of the equity.

    edit. to clarify

    you own that bit of the house less any debt that's left on that share.

    you split the value before paying off the debt .


    easiest way to think about it,

    if you paid cash ..... £175 £75
    if you got 2 separate debts(eg. bank of mum and dad) and then paid cash you would still split £125 £75
    getting the debt s a mortgage does not change that.
    Last edited by getmore4less; 10-06-2017 at 11:00 PM.
    • RED28
    • By RED28 10th Jun 17, 11:14 PM
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    RED28
    • #9
    • 10th Jun 17, 11:14 PM
    • #9
    • 10th Jun 17, 11:14 PM
    If you include the mortgage liability then yes, but we are not. It is calculated to reflect the capital paid into the property.

    Based on my figures, if the property value were to increase by say £10,000, then i would get 78% of that and my partner 22%.
    Me = £70,000 + £7800 = £77,800, an increase of 11% on investment
    Partner = £20,000 + £2200 = £22,200, an increase of 11% on investment.

    If i calculate it using your figures including the mortgage, then technically a week after buying the house my partner was entitled to a share of my deposit which i see as unfair. This way we would both get the same return on our investment.

    Could you help with the wording of the amendment to the Declaration of Trust?
    • getmore4less
    • By getmore4less 10th Jun 17, 11:43 PM
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    getmore4less
    You are ripping of your partner with your approach.

    if you don't include the debt being serviced then you it just does not work fairly

    Your equity bought with your deposit is protected it buys a % of the
    house when sold it gets that %.

    if you put 25% down that's what you buy not more just because there was some debt. you split the value BEFORE paying off the debt.

    with your system if you put £1 down the OH zero you own 100%.
    if you had an interest only mortgage the OH would NEVER own anything even after years.

    clearly wrong

    without that £1 what do you then own?
    if you had 100% interest only mortgage you would say you both own nothing with your method.

    Any algorithm should work for EVERY combination of cash/debt.


    You don't understand the concept of servicing debt also being an investment.

    if you bought the house with the OH using cash and you using debt would it be fare the OH own it 100%, that's what you are saying.

    In your example your £70K only buys 35% of the £200k property not 78%, the £20k buys 10%, the debt buys 55%.

    edit:
    that works out for your £10k a 5% rise.
    £70k becomes £73.5k (5%)
    £20k becomes £21k (5%)
    £110k becomes £115.5k (5%)

    £115.5 is split depending how much of the debt you take on and you pay your share of the remaining debt from that.

    The debt becomes independent of the equity and this works for every value of deposits, debt split extra overpayments, underpayments

    The debt buys you a variable value piece of the asset
    Last edited by getmore4less; 11-06-2017 at 7:27 AM.
    • RED28
    • By RED28 11th Jun 17, 7:25 PM
    • 20 Posts
    • 2 Thanks
    RED28
    Thanks for taking the time to reply my posts. I am going to look again at the figures as i can assure i am not trying to 'rip off' my partner. I hope we never have to use the document!

    But regardless of the figures, we still need to amend the Declaration of Trust. Does anyone have any experience of updating an existing one and the wording to clarify it is an amendment?

    Current statement reads:
    "This restatement supersedes all previous trust declarations, agreements, amendments, and restatements."

    Is this enough to show that is supercedes the old one or do i need to be more specific?
    • getmore4less
    • By getmore4less 11th Jun 17, 8:29 PM
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    getmore4less
    The change of thinking can be difficult but if you start from a 100% mortgage.

    eg paid 50:50 or 75:25 most people would be happy with the ownership being 50:50 or 75:25 for that purchase.

    the reality is once you have borrowed the cash you convert it to equity that varies in value from that point on they are independent

    If the debt is a mortgage then that is just security, how you split it is up to you as if you got it from other sources and paid for the place all in cash.
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