Declaration(s) of trust

PerpetualStudent

Hi,

As briefly as possible - my boyfriend and I are about to buy our first flat. Except, legally - I'm not. For various financial reasons, such as his family stumping up most of the cash, it's going to be solely in his name. However our actual incomes are broadly similar, so we will be splitting all costs of the mortgages, bills etc 50/50. (yes I said mortgageS - this is where it gets stickier, he has taken out a small mortgage on the flat, his parents have also remortgaged their place to release the majority of funds needed. We're making ourselves responsible for their repayments)
There's also a pretty likely possibility a recent inheritance of mine will help renovate the property.

So far, so good. The house is a ground floor Victorian conversion, which we are going to own it as a 50% share of freehold with the housing charity who currently own the whole building - it has been split into two flats for some time. We'll have a new lease on the downstairs flat, as will the charity, who will continue to rent the upstairs flat to their current tenant (a nice single lady - we we've met and seems no bother). But our solicitor is advising us to make arrangements with the charity as to how we'll manage joint costs - mainly anything that needs doing to the roof, or small communal entrance and front garden.
I've been looking into this, and it seems like having a declaration of trust with the charity is the best call. So further, so gooder.

Looking into declarations of trusts a little more, it seems they're also often used to formalise arrangements between unmarried couples buying property together. We have talked about having some kind of agreement between us, as although I'm not legally owning the property, I will be putting money into it from the moment the completion happens. So I'm now wondering if it's prudent to suggest a second declaration of trust, detailing what would happen to my investment in the flat if things ever go sour between us. Obviously I'm fully intending for them not to, in fact I'm hoping we'll start a family in a year or so - but I've read a declaration of trust can even cover what happens to kids living in the property, which seems useful.

So answer me, these questions 3:

1) Is there any point getting a declaration of trust to cover the financial arrangements between me and my boyfriend on the flat?

2) Is it even possible to have 2 declarations of trust on the same property?

3) If it is possible, is it just going to get stupidly expensive - I've read getting these things laid out can cost anywhere between £100-£500 a piece?

Finally, I've read declarations of trusts between couples usually become invalid if they get married, and even that it might be legally simpler (though of course, probably not cheaper!) to just get hitched.
So sneaky 4th question is - can I use this issue to browbeat my boyf into marriage (JOKING! mostly...)

Thanking you all for reading, and for any advice you feel able to give!

Foxy-Stoat_3

Your partner is buying a flat to rent, your not putting up any deposit but contributing to the mortgage and repairs etc. The rent will be paid to your partner, who will pay the tax.

Worst case, you don't get married and the relationship breaks down in say 5 years. You want to protect the money you have paid into the flat?

Assuming this is a BTL mortgage, it will be interest only so you wont pay any capital. What money are you hoping to protect with the deed of trust?

PerpetualStudent

Hi Foxy-Stoat. My partner isn't buying a flat to rent - it's going to be our home. The tenant I mentioned is the tenant of the upstairs flat, which is owned by the housing charity who are selling the downstairs place to us (I can see why you got confused - I've edited my OP now for clarity).
He's not getting any rent - unless you're saying my contribution counts as rent?

The mortgage on the property is not a BTL mortage, so we will be paying back capital as well as interest. So say things break down in 5 years, like you say - these repayments, on top of the inheritance I mentioned, which will be invested in renovating the flat, and my contribution to solicitor/surveyor fees etc etc, is going to represent something like £25,000. We've been advised the work we're going to do on the flat is likely to push it up significantly in value, plus it's London so the value of the house is likely to go up in anycase. So the money I'm hoping to protect is that investment as mentioned, and the proportionate value it adds to the house. Hope that explains it?

I would like to say again I am of course just being highly practical here - we're a solid partnership, but I am very much of the opinion that if you can't discuss financial issues when you're madly in love, you've no chance if you ever can't stand the sight of each other!

Foxy-Stoat_3

PerpetualStudent wrote: »

Hi Foxy-Stoat. My partner isn't buying a flat to rent - it's going to be our home. The tenant I mentioned is the tenant of the upstairs flat, which is owned by the housing charity who are selling the downstairs place to us.
He's not getting any rent - unless you're saying my contribution counts as rent?

I see, so the sitting tenant is irrelevant information in this thread. Apologies.

I would say it would of been better to take out the mortgage in joint names with the declaration of trust being the cash deposit given by the parents. That way everyone is covered and no one can sell without the others permission and the funds will go to a joint account and be split up evenly.

As you say he has already taken out the mortgage then the agreement will be between you and him if the worst happens. You will have no financial interest in the mortgage as far as the lender goes unless you can add your name to the mortgage.

You could draw up something that states:

Cash value the parents put in.
Cash value your partner put in.
Outstanding mortgage amount on day 1.
Cash value of renovations that you paid in total.
Cash value of renovations that your partner pays.
And what you both want to happen if the flat is sold.
Having a Will will be a very good idea and have it detail the above.

Both sign it and keep a copy each. If the worst happens then at least you have something that you both agreed to in principal. Of course this will have no bearing on the lender as you cannot have any financial interest if your name isn't on the mortgage so you will be unable to force a sale on the flat to get your money out....only owning 50% of this flat way well put pay to anything being enforceable anyway.

Ask your solicitor, you should get 30 minutes free, of what you are trying to achieve and if a trust deed will stand up in a court.

PerpetualStudent

Thanks Foxy-Stoat, that's useful. Sorry if mentioning the upstairs tenant made it complicated - just I feel it's an added layer of complication to the share of freehold issue, so guess it's on my mind!

The final mortgage froms came through this morning, so haven't had a chance to look at them propery, but there is mention of me having to sign something as I'm an adult who will be living at the property - is this what you mean by adding my name to the mortgage?

Good to know about the (free) solicitor advice also, will be getting in touch with ours and seeing what he suggests...

Foxy-Stoat_3

PerpetualStudent wrote: »

The final mortgage froms came through this morning, so haven't had a chance to look at them propery, but there is mention of me having to sign something as I'm an adult who will be living at the property - is this what you mean by adding my name to the mortgage?

No, just means the lender knows how many adults will be living there and the relationship between them.

Added you to the mortgage will mean your lender completing a transfer of equity to the pair of you, with the agreement of your partner, your name will be added to be on the deeds also.

I would seriously consider this when/if you input a sizable amount of cash into the flat as at the moment you will not lose much in the first 5 years as you won't be paying much in the way of capital off in this time.

Understand why your name isn't on the mortgage as your partner will want to protect this parents cash input but when yours equals the parents then that would be the point at which you name should be added...or by that time you would of [STRIKE]tricked[/STRIKE] asked him into marrying you !!

Kynthia

Do you realise what risk you are placing yourself in? You are going to be paying half the mortgage and bills, as well as investing your inheritance in a property owned by someone else who you aren't married to!!!

If you split up how are you going to decide how much you should get back and how to split any increase/decrease in value in the property? Why do you need a second declaration of trust as the one that deals with this is the only one that matters to you. Considering it is possibly protecting many thousands of pounds of your money, spending a few hundred on it with a legal professional is a bargain.

As the previous poster says, why didn't you buy the property jointly so you both were protected and have a declaration of trust to protect his parent's gifted deposit or any other unequal deposit amounts? The document the mortgage lender wants you to sign is to confirm that even though you'll be living there you have no rights to the property, so that you don't make it difficult to repossess the place. Also you may need to sort wills as you could be chucked out if he dies.

I personally wouldn't buy a property and certainly wouldn't have children with someone who wouldn't commit to me in marriage. If you are happy to then at least make sure you understand the risks and mitigate them.

Foxy-Stoat_3

Kynthia wrote: »

Do you realise what risk you are placing yourself in?
.

I think the OP does know, hence her thread asking questions!!

PerpetualStudent

Haha, cheers Foxy-Stoat!

As the previous poster says, why didn't you buy the property jointly so you both
were protected and have a declaration of trust to protect his parent's gifted
deposit or any other unequal deposit amounts? The document the mortgage lender
wants you to sign is to confirm that even though you'll be living there you have
no rights to the property, so that you don't make it difficult to repossess the
place. Also you may need to sort wills as you could be chucked out if he dies.

Thanks Kynthia. To be honest we didn't buy the property jointly for a few reasons - 1st because the capital is largely coming from his parents, secondly because as a doctoral student with a research grant I don't have taxable income as such, which we thought would be confusing and thirdly I have some (small!) debts I had to default on in the past few years, so my credit rating is a bit grubby - though we didn't look into it that deeply we figured it wasn't worth doing. I hadn't thought a declaration of trust with my partners parents might be a good move - I guess my partner is more trusting of his relationship with his parents than I am of ours?!
Your point that a few hundred quid of legalese now could easily protect thousands of pounds in the future is a good one!

The marriage thing is a tricky one, and I think does come down to how you personally feel about it, though of course it is a legal issue too. I'll be showing my partner this thread though, Kynthia, to demonstrate what a blaggard he his to leave me unwed!

Kynthia

Foxy-Stoat wrote: »

I think the OP does know, hence her thread asking questions!!

Not enough I fear. I'm not sure she realises the solicitor is only working for her boyfriend and there is no legal professional currently protecting her interests or advising her. Or that her boyfriend could kick her out at any time and she would have to sue for any money she felt she was entitled to.

OP, if your income and credit history are okay then I would very strongly recommend you both cancel the current mortgage application and reapply for a joint mortgage. Losing any arrangement fee already paid to the mortgage lender is alone not a good enough reason not to do this. This will mean you are a joint owner and equal in the commitments, risks and benefits of ownership. If your boyfriend isn't up for this, even if a deed of trust protects his parent's money, then I'd really want to know why?

PerpetualStudent

Thanks again Kynthia - it isn't really a question of my boyfriend not being 'up for' this - it was a decision we made together (he, his parents and I). I take on your points though, and I'll certainly look more closely at my credit rating to see exactly where I stand.

Do you know if research grants are seen as income? Because I'm not at all sure - my maintenance grant is not taxed, it's only fixed for the remaining two years of my doctorate, and it's not super high in the first place - I can't really see any mortgage providor taking it seriously...

We have a mortgage broker who is currently advising us to re-mortgage when our fixed rate comes to an end in a few years anyway, by then with any luck I'll have an academic or (more likely given the state of academia) a university admin role with a decent wage that allows me to go halves on that remortaging.

So that would mean all I've got to do is not get thrown out/get married in the next two years?! Any tips?...