Dividing the proceeds of a sale

Tirian

So, basically a mathematical / fairness question here.

When my partner bought her first flat for 155k, she received assistance from her parents by way of a contribution to the deposit. She paid in 25k, they 75k. She then took on a mortgage of 60k to cover the remainder of the price plus costs (stamp duty, solicitor fees etc).

Now the flat is being sold, and I have been dealing with the paperwork, and found a piece of paper stating that on sale, the proceeds would be split 25/75 between her and her parents.

This doesn't make sense to me - since they did not have a 75% stake in the property - only in the deposit. If this were followed through they would get back 20% return on their share after mortgage and costs deducted, even though the house only gained 10% in the period.

My question is what is the right/fairest way to divide the proceeds?

My feeling is that it would be that parents receive 75/155 of the sale price, and she receive 80/155 of the sale price - but pay off the mortgage and sale costs out of this.

Any thoughts?

zappahey

Tirian wrote: »

My question is what is the right/fairest way to divide the proceeds?

In accordance with the written agreement, assuming that it is a legal document.

ognum

Firstly I think this is an issue your girlfriend should deal with and have a conversation with her parents about.

Secondly, they came to an agreement they were both parties to and were happy with. This is the basis her parents lent the money to her.

You talk of things being unfair an want to change the basis of an agreement, that is unfair!

Maybe if your girlfriend, not you, sits down and has a conversation with her parents they will understand your position, maybe they won't.

Don't get between the relationship your girlfriend has with her parents!

Tirian

Thanks guys, not very helpful.

First of all, this wouldn't be being discussed if it were all being arranged via legal process.

Second - wife, not girlfriend.

So, how about starting again. Let's assume that this is a discussion between a group of reasonable people, looking for the fairest conclusion.

Now - anyone want to actually answer the question that's being asked?

ognum

Tirian wrote: »

Thanks guys, not very helpful.

First of all, this wouldn't be being discussed if it were all being arranged via legal process.

Second - wife, not girlfriend.

So, how about starting again. Let's assume that this is a discussion between a group of reasonable people, looking for the fairest conclusion.

Now - anyone want to actually answer the question that's being asked?

So the people who have replied have said stick to the agreement made and you don't like the answer so are asking again!

Richard_Webster

Depends on wording, but from what's been written so far it looks as if it should be that you sell property, pay off mortgage and costs of sale and divide what's left 75/25.

fallenwiccan

Tirian wrote: »

Thanks guys, not very helpful.

First of all, this wouldn't be being discussed if it were all being arranged via legal process.

Second - wife, not girlfriend.

So, how about starting again. Let's assume that this is a discussion between a group of reasonable people, looking for the fairest conclusion.

Now - anyone want to actually answer the question that's being asked?

If the document is a Deed of Trust then it should be legally binding, you need to talk to them first and foremost.

Will any money over and above the mortgage actually give profit? If not then I don't see the problem, give the parents their share owed and you keep the share put in by your wife. If there's profit ask them if they would like the portion they are probably entitled to, they may not want it any more but if there is any profit surely they should see some return just as you are. Would your partner have been able to buy the house without this interest free loan?

ognum

Tirian wrote: »

Thanks guys, not very helpful.

First of all, this wouldn't be being discussed if it were all being arranged via legal process.

Second - wife, not girlfriend.

So, how about starting again. Let's assume that this is a discussion between a group of reasonable people, looking for the fairest conclusion.

Now - anyone want to actually answer the question that's being asked?

first you have an agreement

second, it makes no difference if it's wife or girlfriend

Tirian

OK, I don't know how I can make this any clearer - I am not asking about the legal situation.

We have of course talked to her parents. We couldn't have sold the house without their consent. They have told the solicitor to pay the entire proceeds to us, and that we will then discuss how to divide it.

I am simply asking about the fairest way to do so, and what a reasonable position would be. Neither they nor I are interested in a technical discussion about legal agreement. If they want to stick to what is on the form, I won't argue for a moment.

However that would result in their receiving their original investment plus 20%, and my wife - having paid a 25k deposit and paid down c. 10k capital on the mortgage, getting back less than she has put in.

So, once again ... can we just assume that EVERYONE involved wants a fair division of the proceeds. What way(s) are there to do this?

vuvuzela

Personally, as your wife would not have been able to either get a mortgage on the property or secure one at advantageous terms without such a large deposit, I would stick to the agreement.
I think what I would do is take out the 75K from the proceeds and give it to them along with a 75% share of whatever equity there is after also deducting the 25K from your wife and the costs of selling. That seems fair. Yes that might mean that if your wife takes into account what she has paid on the mortgage then she comes out at a loss. But she would have had to pay rent during this time if she wasn't a home owner and her parents could have got interest on their money iif it was invested.

Tirian

fallenwiccan wrote: »

Will any money over and above the mortgage actually give profit? If not then I don't see the problem, give the parents their share owed and you keep the share put in by your wife. If there's profit ask them if they would like the portion they are probably entitled to, they may not want it any more but if there is any profit surely they should see some return just as you are. Would your partner have been able to buy the house without this interest free loan?

First of all, thanks for actually answering the question!

Yes, there will be a profit once mortgage and costs are paid off. The intention when the money was put in was that the parents would share any gain or loss in the value of the property when it was sold.

However when I calculated what a straight 75/25 split of the profit gave, it didn't seem to reflect that on top of her 25% share of the deposit my wife has paid something like 30-40k in mortgage payments.

Before anyone gets started again, this is not about what's written on the agreement. We don't want (and don't need) to take money unfairly from her parents; her parents likewise don't want (or need) to do anything that's unfair to her. I know this is a difficult concept for legal-minded peope, but there it is.

It's a fair point that they have provided an interest free loan - however, it was on the understanding that they would take a share of the profit when the house was sold. If they wanted interest, they would have put it in a bank. Hence why I am here asking this question!