Declaration(s) of trust

PerpetualStudent

PS Richard, as a conveyancing solicitor, if you had a client in my positon, from a purely legal consideration would you advise a declaration of trust or marriage? I.e. which gives more protection under the law in the case of properties contributed to but not formally owned?

Thrugelmir

weeg wrote: »

C
So we've talked about money. We're having the lawyer draw up an agreement 'in case'. (he'll pay the mortgage in it's entirety until what he has paid equals what I have paid, then we'll go halves. Any equity we accrue would be split equally. We'll go halves on renovation costs). His life insurance will more than cover the mortgage costs and our wills will reflect our mutual commitment to each other.

However your partner can do whatever he wishes with the property. Borrow against it, sell it , anything he likes. Your only recourse will be the courts.

xylophone

I wouldn't enter into this transaction for love or money! - just an opinion!
Let the chap make his own agreement with his family - if you want to live with him, become his lodger and pay him rent and a share of the bills - hang on to that inheritance until you are ready for a long term commitment? - Dare I, too, whisper the arrangement that dare not speak its name ( the M word:eek:) to a 21st century couple....

PerpetualStudent

See my last post Xylophone. It's an arrangement whose name has been spoken. Im asking about the legal recourse it offers - any thoughts?

Kynthia

As long as you go into the arrangement fully knowledgeable and with your eyes wide open then the choice is yours. What worries me is because so many couples are unmarried and are together for years before tying the knot (if ever) that many now don't realise the implications of not being married when building a life together. They also feel like they're unreasonable or old fashioned if they insist on marriage before other big commitments. As living together before marriage is normal they don't realise that buying together has big risks.

I wouldn't say someone should get married purely to avoid the risk to their investment in a property because marriage is a big deal and you can use other means. However marriage is a legal joining of two people into a couple, and not just a religious joining or a public declaration of love (which it also is for some people). So it's not wrong to get married for the sensible legal reasons as well as because you love each other and want to build a life together. Off the top of my head it means you are each other's next of kin, he can register the birth of your child, there's legal protection on the division of your combined assets should you divorce, there's tax management benefits including inheritance tax and SDLT, better protection regarding inheritance should one of you die without a will, even some pension providers don't pay out to unmarried partners. Many will argue this but the statistics also show that marriage is more secure for children, and I feel that it's a more secure relationship because it can't just be ended after a bad row. Marriage also recognises the non-financial contributions to a partnership which is why the one who stays home to raise children while the other works is entitled to a share of the assets in a divorce. If an unmarried couple split there's no automatic court to sort this so one would have to sue the other if an agreement couldn't be made, and they would have to evidence their direct financial contribution to assets only so if they hadn't made any they get nothing.
http://www.adviceguide.org.uk/england/relationships_e/relationships_living_together_marriage_and_civil_partnership_e/living_together_and_marriage_legal_differences.htm
http://www.telegraph.co.uk/finance/personalfinance/consumertips/10162608/Why-getting-married-leaves-you-better-off.html

OP your boyfriend is taking on all the risks of ownership but also gets the rewards. The lender has calculated his affordability so he should cope if you left. If you put money into the property then you need the courts and evidence like the deed to just get your money back or any rewards. As I said though, now that you know more it's up to you what you do.

Richard_Webster

PS Richard, as a conveyancing solicitor, if you had a client in my positon, from a purely legal consideration would you advise a declaration of trust or marriage? I.e. which gives more protection under the law in the case of properties contributed to but not formally owned?

As a conveyancing solicitor, my business is the law rather than personal relationships, so I would advise a declaration of trust, but I would also warn that it is not a perfect solution.

Better to have one than not, but its terms still have to be enforced and that can be expensive.

If he wants to sell then you can impose a restriction preventing this without your consent (which you give if you get the money the deeds specifies - provided the calculation of the amount is clearly set out).

If you want to realise your funds and he doesn't then you may have to go to court and compromise on what you get to save legal costs.

getmore4less

I will split my reply to cover the relevent bit seperately.

Starting with the "gifted" deposit that the parents have got a loan for that you will be paying...

such as his family stumping up most of the cash ... his parents have also
remortgaged their place to release the majority of funds needed. We're making
ourselves responsible for their repayments

Does the lender of "your" mortgage know this is a loan(to you as a couple) from the parent and not a gift?

Also

Are there any overpayment or early repayment clauses on the parents mortgage

What is the rate of interest and term.

Road_Hog

PerpetualStudent wrote: »

See my last post Xylophone. It's an arrangement whose name has been spoken. Im asking about the legal recourse it offers - any thoughts?

This all seems to have got very complicated from a simple question.


The reasons for not wanting to be on the mortgage are quite straight forward and understandable.


You certainly don't need to consider marriage to buy a property jointly.


You do however need to protect your assets, and whilst you may be the 'junior' partner in the financial relationship, that may not always be the case. Surely the best advice would be, to make an appointment with a local solicitor, tell him/her the situation and let them advise you on the best course of action.

getmore4less

OK assuming this goes ahead how to document the inputs and the outputs.

(NOTE: many solicitors are rubbish with numbers so get this sort of thing wrong)

There are two ways to do this

1. EQUITY based.

In the simple case the correct/best way is to establich equity shares from cash or borrowed money, then make the relevent contributions

on a split you dish out based on the equity share and then pay of any debts(if there are insufficient funds then you end up with a debt to one or other party).

the key is to seperate out the cash/debt(which are fixed) from the equity it buys(which is variable).

eg: the total(purchase and all fees) cost to buy a place is £200k
you==1. OH==2
deposit 1 =£10k
deposit 2 =£50k
Motgage = £140k which you decide to split payments 1=60% 2=40%

so at the begining
1 puts in 10+0.6*140= £94k = 47%
2 puts in 50+0.4*140= £106k = 53%

Now you pay the mortgage in the split above overpayments also need to be in the same ratio*.

Any investments in the property are split in the equity shares.

When you exit the agreement you get the equity shares from the net proceeds(before the debt is paid off) then you pay off your shares of the mortgage.

This works for all deposit sizes and splits of the debt
It is simple to keep on top of as the mortgage side just works and as long as the investents are split the equity % you never need to revalue.

2. LOAN based

The other way a lot of people do it is to lend the other person 1/2 their deposit.

THis is usualy writen as you get your deposits back but in reality this is just an interest fre loan to the OH of 1/2 your deposit.

the problem is this favours one side if prices rise and the other when they fall.

======================

Ok to your situation I recommend that you stick to equity based but you have two complication.

There is a 3rd party loan
you are going to invest in improvements

Starting with the 3rd party loan.

I think as you are paying this loan you can treat this the same as the simple case above just there are two mortgages.

On paper I would keep them seperate as may want to overpay them diffently or even split the debt share diffently from the other mortgage.
(There is the seperate issue of what if you get into financial difficulty what gets paid first, can the parents support this debt on their own)


Now for the more complicated issue, normaly under equity share you would fund improvements on the equitable basis, but in your case you are injecting a lot more.

Depending on time scales,

1. if relatively soon after purchase and as a single lump sum(more detail needed).

I think I would consider this as starting capital so add this to the purchase costs as part of the deposits so you are buying a bigger initial share.
this then becomes part of the cash pot for future inprovements(offset mortgage might be an idea here)

after this initial cash runs out you then fund based on the equity shares.

2. if much later and the value of the property has changed then you need to do some valuations work.

conveniently you can ignore the mortgages at this point.

Get a new valuation, you have the current split you add your cash to your share an work out the new equity shares.

eg: taking the above £200k 47:53 split

House is now worth £250k and you are injecting £50k. so total costs now 300k
1. 47% of £250k + £50k £167500/£300k = 55.83%
2. 53% of £250k = £132500 /£300k = 44.17%


Now all the obove just covers the basic and works for all values up and down.

---

The added complication is the various exit senarioes there are loads of posts that cover these here are a few.

death of either of you or the parents that hold the mortgage.

financial difficulties one or both of you loose income

children come along

you want to seperate and how to exit(sell ,buy out, get lodgers. etc)

...

weeg

Apologies PerpetualStudent for the minor threadjack.

Thrugelmir wrote: »

However your partner can do whatever he wishes with the property. Borrow against it, sell it , anything he likes. Your only recourse will be the courts.

And, hypothetically, if we were married, surely our divorce will also go through the courts?

Kynthia wrote: »

As long as you go into the arrangement fully knowledgeable and with your eyes wide open then the choice is yours. What worries me is because so many couples are unmarried and are together for years before tying the knot (if ever) that many now don't realise the implications of not being married when building a life together. They also feel like they're unreasonable or old fashioned if they insist on marriage before other big commitments. As living together before marriage is normal they don't realise that buying together has big risks.

I wouldn't say someone should get married purely to avoid the risk to their investment in a property because marriage is a big deal and you can use other means. However marriage is a legal joining of two people into a couple, and not just a religious joining or a public declaration of love (which it also is for some people). So it's not wrong to get married for the sensible legal reasons as well as because you love each other and want to build a life together. Off the top of my head it means you are each other's next of kin, he can register the birth of your child, there's legal protection on the division of your combined assets should you divorce, there's tax management benefits including inheritance tax and SDLT, better protection regarding inheritance should one of you die without a will, even some pension providers don't pay out to unmarried partners. Many will argue this but the statistics also show that marriage is more secure for children, and I feel that it's a more secure relationship because it can't just be ended after a bad row. Marriage also recognises the non-financial contributions to a partnership which is why the one who stays home to raise children while the other works is entitled to a share of the assets in a divorce. If an unmarried couple split there's no automatic court to sort this so one would have to sue the other if an agreement couldn't be made, and they would have to evidence their direct financial contribution to assets only so if they hadn't made any they get nothing.

FWIW, My partner and I - perhaps because we have no intention of ever marrying - are entirely honest with each other in financial matters, and what we want and expect from each other. We are certainly more organised legally and financially than some of my married friends - and our relationship has lasted longer than some of their marriages. My partner believes that marriage is unnecessary state meddling in a private relationship, unless you are religious. And I love (and trust and respect and like) the dude, so I respect that decision on his part.

I realise you don't mean it that way Kynthia (so I quoted you not to make an example of you, but because you express most eloquently a common theme), but many people seem to perceive non-married house buying (and by extension non-married couples) as either naive, stupid or both. I really came into this thread to suggest that the OP is neither and that some of the kneejerk early posts are really uncalled for.