Equity entitlement query

stevenbmkiv

My father and I jointly applied to purchase the maisonette that my wife and I live in. he did it to offer my wife and I a helping start and we advised my father that upon sale of our home we would pay him a sum of money to say thanks.
It has now come to the time of sale so I have asked my fathers consent to be able to sell our home.
It was bought jointly and the mortgage application was created in mine and my fathers name. However, my wife and I have paid for everything right from the start including all the solicitors fees, valuations fees and all 5 years worth of mortgage payments. We have also funded the home improvements which have helped to obtain the market value that it now is.
As my wife and I have funded every penny from the off, we wanted to know where we may stand with regards to his equity entitlement. The sum of money we offered was not accepted and he is looking into his circumstances.
Essentially my father is on the mortgage agreement but we are legally joint owners but he hasn't funded a single penny.
I thought that the worse case scenrio would be he wants 50% equity but I would argue that I want 50% of the mortgage payments that my wife and I funded, 50% of the estate agent fees, 50% of the home improvement costs and 50% of the mortgage early settlement fee. Does this sound reasonable?
I don't want to have to take court action and fall out with my father so I just want him to tell me what he is prepared to accept so we can resolve this amicably.

Thanks for reading, any advice appreciated.

Annisele

Presumably there's no Deed of Trust setting out who gets what in the event of a sale? If not, you either agree between yourselves or you all pay solicitors lots of money.

For what it's worth, I think:

• The interest you paid towards your mortgage is completely irrelevant. You were essentially paying to "rent" the money the bank lent you - so you shouldn't get any part of that back. If it was a repayment mortgage, then part of your payments have gone towards reducing the capital (though in five years, not all that much) - and maybe you should get the benefit of those.
• You're the ones wanting to sell, so you should cover the estate agents fees.
• You've presumably already paid the home improvement costs, so I don't see how they figure now. If you can show that the money you spent really did increase the value of the house (it doesn't always), then maybe you should get a partial benefit for that.
• For the early settlement fee - you're the one wanting to sell early, so you cover it.

Plus you presumably couldn't have bought the flat at all without your father going onto the mortgage, so for him to get half the uplift in value sounds reasonable to me.

Depending on your actual figures, I can easily see an argument for him coming out of this with more money than you do - but that depends on how much equity there is, how much the ERC is, etc.

Thrugelmir

stevenbmkiv wrote: »

The sum of money we offered was not accepted and he is looking into his circumstances.

What did you offer him and on what basis did you arrive at the figure.

stevenbmkiv

Thanks for the reply.
We've paid a fair chunk of the mortgage as we only started out on a 13 year term and have completed 5 years.
It is a repayment mortgage.
I won't sell if it's not economically viable to do so.
We didn't set out a post contract agreement of any kind so I guess my Dad will have to advise what he is happy with and we'll go from there.
We don't need to move, as it's more of a "Want" than a "Need". However the personal and moral issue for us is that we are both going to benefit from a mutual agreement if we can reach one.
The rest of my family agree that a partial lump sum to my Dad is fair which my Wife and I are happy to do.
I believe my fathers wife is making him pursue money for her own gain rather than his.

stevenbmkiv

Thrugelmir wrote: »

What did you offer him and on what basis did you arrive at the figure.

When I initially spoke about us potentially selling up I said maybe 10% of the estimated equity was possible and he sounded very pleased and even said he doubt he'd want that much. Overnight he changed his mind but I believe his wife is trying to make him seek more for her own personal gain. It is difficult to say.
In essence, my wife and I could stay in our home for the rest of our working lives (approx 25 years) so we aren't going to move unless we resolve this amicably. We can prove that our home improvements have made the property more valuable as the value has increased £23k in 5 years (of course I understand property values have increased since then anyway) and speaking with people I know they are in agreement.

Thrugelmir

stevenbmkiv wrote: »

In essence, my wife and I could stay in our home for the rest of our working lives (approx 25 years) so we aren't going to move unless we resolve this amicably.

Doesn't resolve the issue of your fathers ownership and the fact he could bequeath his share in his will.

stevenbmkiv

Perhaps not but at least my wife and I would have saved enough to retire on.
Essentially we want to be able to move to a bigger property so we can start a family.
We've already made him aware that if anything happened to his wife we would take him into our home.

My fathers worry is that his wife has her name on her home tenancy but can't put his name on it as he has a mortgage with me so it is in his interest to come off it too so he can get his name on her tenancy. he has peace of mind both ways then.

I know there many technicalities. I don't want to have any immoral tactics applied here, just a mutual agreement.
We shall see.

Annisele

stevenbmkiv wrote: »

My fathers worry is that his wife has her name on her home tenancy but can't put his name on it as he has a mortgage with me so it is in his interest to come off it too so he can get his name on her tenancy. he has peace of mind both ways then.

That could get very messy. His wife may not even want him named as an owner of her property. If she has children of her own, she might be planning to leave her property to them (potentially with a life interest for your father). It's possible your suggestion to your father has got her thinking about her own position, and that leaving a few days for the dust to settle will help.

I do think you're in a potentially vulnerable position, depending on your relationship with your father's wife. If he dies and leaves his interest in your house to her, or if they divorce and your house is included in his assets, she might be able to cause considerable problems for you. (You'll also have a problem if he goes bankrupt, but I suspect that's unlikely). My own view is that if she's going to cause problems it's better for them to happen sooner rather than later - but opinions will probably differ on that point!

stevenbmkiv

My Fathers wife doesn't own her property as it's Housing Association and her children are aged 23 and 20 respectively. Her son has all but moved out and her daughter is lodging with her.
We want to resolve it sooner rather than later too so we can just move on.
Like you say, we've said what we need to and I'm leaving it a few days for things to settle down.

Mojisola

stevenbmkiv wrote: »

My father and I jointly applied to purchase the maisonette that my wife and I live in. he did it to offer my wife and I a helping start and we advised my father that upon sale of our home we would pay him a sum of money to say thanks.

Why didn't you agree the amounts at the time and get it all in writing?

What kind of figure did you have in mind when all this was arranged? Did you never say 'I think X% would be fair - what do you think?'

I hope you can sort this out without ruining your relationship with your Dad.:(

lonestarfan

In your op you say you and your father jointly appled. You don't say you and your father jointly put in an amount of money each as a deposit. Who paid the deposit? So did you just need your dad on the mortage so that with his income and your income they would lend you the amount you needed to buy it? If so then I don't see why he should get anything from the equity as he never contributed anything BUT you wouldn't have been able to buy it without him so perhaps that means he gets 50% of the increase in value. Seems a bit unfair though when he's not contributed to the improvements that enhanced the value.