Property Jointly Owned with Ex-Wife who is now BR

PetMad

Good evening,

I wonder if anyone can help with some questions regarding bankruptcy please.

My friend and his then wife (now his ex) purchased a property jointly 12 years ago. They divorced last year (2012) but there has never been a financial settlement. They agreed they would both continue living in the property together to care for their 11 year old son but after a few months she announced she had declared herself bankrupt and wanted him to leave the house as she wanted her new partner to move in with her. My friend agreed to this because he knew she wouldnt be able to find alternative accommodation for herself and their son because she only earns £15,000 pa and was by then bankrupt. His lawyer drew up a letter which he handed to his ex-wife stating that he retained his right to live at the property and could return at any time he wished. The agreement was that she would take over the payment of the mortgage and that her new boyfriend would take responsibility for all bills etc.

After a few months, my friend contacted the OR to ask what was happening to the property. Its valued (he believes) at approx £175k with a mortgage of £162k. The OR told him that nothing was happening at the moment as they were still discussing matters and the property couldnt be sold without their agreement. He wasn't happy as he is currently stuck with his name on a mortgage for a property he doesnt live in and he himself has recently been made redundant where it appears owning a property but living in a separately rented property causes chaos because if you own a property then you are not entitled to housing benefit.

Last week, he contacted the OR again to be told that he could buy the beneficial interest for a sum of approx £5k plus £211 in costs. The question he is confused about and that was pointed out to him, is that if he proceeds to purchase her BI, she will still be the legal owner (have Title) so they will still be 50/50 owners so he still couldn't sell it without her say so but he would be entitled to all profits from future sale. Is that correct or does him buying her 50% of the beneficial interest from the OR then give him 100% ownership (title)?

The money to purchase his ex's BI is coming form his parents but if he does proceed and buy it, does he then have to notify the mortgage company to have his ex's name removed from the mortgage? If so, surely they would decline to put it in his sole name as he is currently unemployed (although he has had a job offer this week but for a salary of £24k which, on paper, would not service the £162k mortgage).

This is all confusing and nobody seems able to give him answers - can anybody out there help please?

Thanks in advance.

debt_doctor

Hi,

Buying the BI in a property does not affect the legal title to a property. An agreement can be drawn up influencing the future equity in a property when purchasing the BI, or not - it is up to the BI purchaser.

The mortgage provider is extremely unlikely to take someones name off a mortgage contract - they currently have 2 people to chase - why would they lessen their opportunities.

Sadly, you are also correct re the housing benefit rules, although there are exemptions to this rule and you should explore them.

DD

Mouse1812

Ownership of property consists of two elements, legal ownership (control) and beneficial ownership (right to proceeds of sale).

Most homeowners enjoy both elements in equal proportions so do not know about this.

If your friend buys back the BI he will have 50% legal ownership and 100% Beneficial ownership. That is on a sale he would be entitled to all the sale proceeds.

Now the BI can change. If his ex continues to pay the mortgage she will begin to accrue a new BI. On a subsequent sale she would be entitled to the proportion she paid for post bankruptcy.

PetMad

Thanks for the replies. It would seem that by buying her BI is making her life easy as she gets to stay in the property and somebody else has paid for the privilege.

debt_doctor wrote: »

Hi,


Sadly, you are also correct re the housing benefit rules, although there are exemptions to this rule and you should explore them.

DD

My friend had tried to claim housing benefit but because his ex is considered to be the main carer for their child (they actually have shared care so for both its 3 nights one week and 4 the other) because she claims the Child Benefit then it seems it is deemed acceptable that he doesnt sell the property to allow his ex and child to live there so they did eventually let him make a part claim for housing benefit for his two bedroomed rented flat but would only pay the equivalent rental of a one bedroomed property. If he wanted to make a claim for the full rent on his two bedroomed property then he would have to ensure he was the named parent for the Child Benefit but that would then mean his ex was living in a house with no parental responsbility and he would be deemed to have a privately owned house with equity and therefore wouldn't be eligible to claim housing benefit because they believe there would be more than £16,000 of equity. However, if the property was up for sale then they would overlook it for six months and allow him to claim. Unfortunately, he can't put the property up for sale as she is sitting tight and can see she is onto a good thing! Its a right carry on and I feel sorry for him as he now faces being in a position of having to move into shared accommodation whereas his ex is living in their home with a fairly low mortgage payment (£450 pm) and only a small IPA payment to the OR which she is trying to reduce at the moment because my friend was made redundant and is unable to make full maintenance payments to her. All this yet she has an undeclared partner living with her and really is living a life of luxury (eating out regularly, purchasing expensive clothing etc. all the usual things that resulted in her being made bankrupt) yet my friend is struggling all because he feels he is doing the right thing for his child. I think the moral to my rant here is that there are times when life just isn't fair!!

Thanks for listening and for the advice (really sorry for the rant above):mad:

Mouse1812

PetMad wrote: »

...she has an undeclared partner living with her and really is living a life of luxury...

If the OR finds out about that she could be in serious (criminal offence type) trouble !

PetMad

Mouse1812 wrote: »

If the OR finds out about that she could be in serious (criminal offence type) trouble !

To be honest, my friend is more worried about sorting out his own finances at the moment and isn't interested in stirring things up for his ex by reporting to the OR that she has a live-in partner or HMRC that she is claiming tax credits etc. He did wonder if he could exert some pressure on her to agree to sell the property by saying that if she didn't agree then he would inform the OR that she does not live alone . He thinks the new partner is paying things such as the Sky package and food etc. so if the OR did look then he probably wouldn't find any definitive proof. However, if the OR sat in the local restaurants then he'd certainly see her and her partner eating out regularly whilst the rest of us dash into Iceland to pick up something a little less pricey :mad:

On a personal level it drives me insane as I'm in an IVA and seriously struggling but committed to trying to repay debt yet there are some folk who have back-up from others (e.g. new partner who pays for luxuries, ex-husband who won't take the roof from over her blah, blah, blah) and so bankruptcy is a very easy way out. Some people have all the luck.......I really need to take some tablets to do something about my increasing levels of bitterness:rotfl:

darren_clarke

why would he buy a BI, in a house he cant stay in, just so his ex wife and kids and new bf have some where to live, tell him to say no, keep the money dont be doing the ex wife and favours as she hasnt done him any

darren_clarke

does your friend pay any of the mortgage?

PetMad

No, he doesn't pay any of the mortgage anymore which does in effect make his position more difficult because, as has been pointed out, if he does buy her BI now, any future equity is going to be hers because she is paying the mortgage alone.

I understand that he is doing all he can to try and ensure his son can stay in the house in the future and that the OR won't force a sale so if buying her BI is the only way he can ensure his son's home is safe then he'll go ahead and buy it.

silvercar

For the amounts involved, chances are the OR would put a charging order on the property to gain the equity once the property is sold. Unlikely (though not impossible) that the OR would force a sale. By the time legal and estate agent fees are paid, there wouldn't be much left for the OR to claim from.