Dividing the proceeds of a sale

Idiophreak

JimmyTheWig wrote: »

Why should they stick to an agreement that no-one sees as fair?

I just find it hard to imagine two sets of people being bothered enough to write something down, but not bothered enough to actually understand what they were writing...

drummer_666

Tirian wrote: »

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).

Her parents paid £75k. The flat cost £155k.
Therefore her parents put in 48.38%.

Her parents should get 48% of the price of the sale. Either before or after legal fees, depending on their agreement.

Ok so she paid stamp duty and solicitor fees. But she must've been happy for that at the time, otherwise her parents would have put in 48% of the cost of this.

If her parents agree then find the costs spent on stamp duty and solicitor fees when she bought the house. And minus 48% of these costs off the lump sum (48%) her parents are due from the sale of the house.

Simple.

JQ.

JimmyTheWig wrote: »

To me, that is grossly in favour of the daughter.
That's how I would call the split if it had been two people jointly buying and both living there.
But given the daughter has been living there and the parents haven't, I don't see this is "fair". (I do take your point about the daughter paying the costs, but I don't think that accounts for anything like the benefit that the daughter has had from the parents' money.)

The above formula would be along the same lines of an interest-free loan.

Obviously, as has been said before, what is fair will depend on what they both think is fair. They might think an interest-free loan is fair. In which case JQ's formula is perfectly reasonable.


When did your wife buy the property, OP?

My equation is the fair way to deal with it and is not an interest free loan, the parents will have received a return on their investment equal to house price inflation. If they wanted an interest rate, that would have been stated in the agreement, however, what is stated in the agreement is a rather woolly split of the proceeds. My equation is a split of the profit, which seems to me to be the fairest outcome for all concerned.

What you're actually suggesting by bringing into the discussion that fact the daughter lived there, is that she should have been paying her parents rent. I'm quite sure that is not what they wanted. What they wanted to do was help their daughter onto the property ladder whilst having their savings tied up in a secure investment where they might get a small return in the long term. If the house was bought in 2000, it's not inconceivable that they have doubled their money - so actually not a bad return.

JQ.

drummer_666 wrote: »

Her parents paid £75k. The flat cost £155k.
Therefore her parents put in 48.38%.

Her parents should get 48% of the price of the sale. Either before or after legal fees, depending on their agreement.

Ok so she paid stamp duty and solicitor fees. But she must've been happy for that at the time, otherwise her parents would have put in 48% of the cost of this.

If her parents agree then find the costs spent on stamp duty and solicitor fees when she bought the house. And minus 48% of these costs off the lump sum (48%) her parents are due from the sale of the house.

Simple.

Sounds right to me to - it results in the same answer as I'd suggested, but for some reason I tried to make it more complicated than it needed to be.

vuvuzela

drummer_666 wrote: »

Her parents paid £75k. The flat cost £155k.
Therefore her parents put in 48.38%.

Her parents should get 48% of the price of the sale. Either before or after legal fees, depending on their agreement.

Ok so she paid stamp duty and solicitor fees. But she must've been happy for that at the time, otherwise her parents would have put in 48% of the cost of this.

If her parents agree then find the costs spent on stamp duty and solicitor fees when she bought the house. And minus 48% of these costs off the lump sum (48%) her parents are due from the sale of the house.

Simple.

However the daughter put in £25K. So she only put in 16.1% so by your calculations she should get 16% of the (sale price - mortgage).
Who gets the other 36% ?

Idiophreak

vuvuzela wrote: »

However the daughter put in £25K. So she only put in 16.1% so by your calculations she should get 16% of the (sale price - mortgage).
Who gets the other 36% ?

Err...whoever raised the mortgage?

JQ.

vuvuzela wrote: »

However the daughter put in £25K. So she only put in 16.1% so by your calculations she should get 16% of the (sale price - mortgage).
Who gets the other 36% ?

The daughter did put in 52%. That 52% is made up of the £25k cash and the remaider she borrowed from a bank which she has been paying back. And when she sells the house she will pay off the outstanding mortgage with part of her 52% proceeds.

zappahey

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?

You asked "what's right?" You got an answer. No need to get snotty because it wasn't the answer you wanted.

drummer_666

vuvuzela wrote: »

However the daughter put in £25K. So she only put in 16.1% so by your calculations she should get 16% of the (sale price - mortgage).
Who gets the other 36% ?

No, she put in 52%. Some of it deposit, some if it a loan - i.e. the mortgage

Parents get 48% back.
She gets back whatever is left after paying back off her mortgage

vuvuzela

drummer_666 wrote: »

No, she put in 52%. Some of it deposit, some if it a loan - i.e. the mortgage

Parents get 48% back.
She gets back whatever is left after paying back off her mortgage

The was clearly not enough to make it obvious I wasn't being entirely serious...