Deed of Trust with sollicitor - what to expect

WeB

Hi All,

As part of purchasing our first property, we asked our sollicitor to include a Deed of Trust in his work. I also asked multiple times when we would meet on this, or how we would do this. I've had to chase him up quite a lot before on stuff, so a couple of days before exchanging contracts I panicked and sent him an email with some figures as I thought we had to have this in place before exchanging contracts and paying the deposit. He came back (on the date of exchanging contracts) saying that wasn't an issue and it only had to be in place before completion.

He's now come back with a 1 and a half page word document which says exactly what I emailed him and saying "[FONT=&quot]Any future changes should be documented by way of an amended declaration" asking [/FONT]us to pass by to sign. I'm a bit confused by this as we're paying 300 GBP for this and for that money I was expecting advice on our specific situation as well as a legally binding document.

We're pretty much out of money, so I don't want to drive costs up, but I feel really unhappy with the output. Especially for that sort of money.

Do you think it would be OK to send the below email? If I could I would back out of this and do it with someone else, but I'm pretty sure that ship has sailed. Any additions or suggestions are welcomed!

Dear,


I am slightly confused by the current version of the Deed of Trust. As highlighted in my previous communications I was always expecting some sort of questionaire or meeting around the subject, where your guidance would provide us with a steer on what should be in this document.


I've done a quick search on Google now and found the following points (see below) which might also apply to us, and which I'm thinking might have to be part of our deed of trust. How do you suggest we proceed and make sure this is catered to our specific situation?

[FONT=&quot]Typically a deed of trust will address the following:[/FONT]

• [FONT=&quot]the amount each owner paid towards the deposit;[/FONT]
• [FONT=&quot]how much each party is going to contribute towards the mortgage repayments; [/FONT]
• [FONT=&quot]the equity split if the property is sold or mortgage ends;[/FONT]
• [FONT=&quot]how much each owner is going to contribute towards home insurance, purchasing costs (e.g., stamp duty, solicitors’ fees, searches), maintenance (e.g., decorating costs, roof repairs, etc), and improvements;[/FONT]
• [FONT=&quot]how the property will be valued if one owner wants to sell;[/FONT]
• [FONT=&quot]a right of first refusal among the owners in the event one party wants to sell;[/FONT]
• [FONT=&quot]what you might do if one owner wants to sell and the other doesn’t want to; [/FONT]
• [FONT=&quot]what you do if an owner wants to move out, but remain a co-owner of the property;[/FONT]
• [FONT=&quot]what happens if an owner dies;[/FONT]
• [FONT=&quot]payment of bills and taxes;[/FONT]
• [FONT=&quot]how rental income from a tenant, if any, is divided;[/FONT]
• [FONT=&quot]what happens if one party fails to make payments (where will the money come from and how will it affect each other’s contributions towards the property?); [/FONT]

WeB

Decided to add what we received this far, as I thought it might be relevant:

THIS DECLARATION OF TRUST is made this day of Two
Thousand and Fifteen

BETWEEN (1) and (2)

WHEREAS:
(A) By a Transfer dated xxxxx 2015 the property (“the Property”) details of which are contained in the Schedule hereto was transferred to (1) (2) to be held by them as tenants in common

(B) By a mortgage (“the Mortgage”) dated xxxx 2015 and made between (1) (2) and (3) the Bank the Property was charged to the Bank to secure the sum of £xxx,xxx,000.

(C) The parties make this Declaration to set out their respective interests in the Property and its proceeds of sale and net rents and profits thereof until sale

NOW THIS DEED WITNESSES as follows:

1. (1) and (2) DECLARE that they hold the Property on a trust of land

2. (1) and (2) DECLARE that they hold the Property and its proceeds of sale (after discharging the Mortgage and deducting therefrom the costs of sale) and the net rents and profits until sale UPON TRUST for themselves as tenants in common:

(a) as to xx% to (1)
(b) as to xx% to (2)

3. The parties hereto COVENANT with each other to pay the payments due under the Mortgage in the same percentage as their entitlement as set out in Clause 2 and to indemnify the other and his estate and effects against all costs claims and demands in respect of the Mortgage to the limit of the percentage before mentioned

4. The parties hereto COVENANT with each other to keep the property in good repair and to pay for any repair and improvements in the same percentage as their entitlement as set out in Clause 2 and to indemnify the other and his estate and effects against all costs claims and demands in respect of the repairs and insurance to the limit of the percentage before mentioned

IN WITNESS whereof this Declaration has been duly executed the day and year before written


SCHEDULE

Registered Land Title Number: xxxxxxxx
Address: xxxxxxxxxxxxxxxxxx



SIGNED AND DELIVERED as a )
DEED by (1) )
in the presence of: )







SIGNED AND DELIVERED as a )
DEED by (2) )
in the presence of: )

WeB

Nobody have any advice on this?

Richard_Webster

Alll the points OP has made are relevant and simply putting in percentages doesn'gt solve the problem because if theris a dsipate one party will say "I paid this and so I should be engtitled to more - its not fair...."

So you have to carefully think through why you have agreed a particular percentage.

You also have to understand that whatever the agreement says it is only a starting point . In practiuce if there is an argument one might say to the other "I don't care what the agreement says, I'm not signing unless you pay me £xx,xxx."

Other says "You can't, it is in the agreement."

"Take me to court then..."

"All right, I will". Goes to see solicitor who tells him/her it will cost several thousand pounds to argue the point - compromise is necessary.

So having a deed of trust is better than not having one because you don't spend expensive legal time proving what you agreed. However it is usually the case that there is scope for argument about the value of the property - and therefore the value of a particular percentage share. Ther can also be side issues like "You owe me because I paid for all the kitchen makeover myself...."

Also, as mentioned, there is the cost of the day in court. So the party that wants some money off the =other may have to settle for a few thousand less than their struct entitlement simply because they could be no betetr off if they went to court over it.

So it is important for the solicitor to make sure both parties understand all the implications - such as what happens if the property goes down in value how do you share the loss? What about putgoings - how are they shared?

One of the biggest reasons for arguments later is because one party thought the agreement meant something other than what it did mean.

PS Sorry for typos - getting old and typing quickly don't go well together!

WeB

Thanks for the advice Richard, it is very much appreciated and following this forum for a while now, I was actually hoping you would be one of the people to reply. My takeaway from what you are saying is that what we currently have (1 pager) isn’t enough and we should strive to get as much detail in to this document as possible –making sure both of us understand it to the full extent (the fact that the document we received is very legal-jargon-ish and neither one of us is native English speaking doesn’t help there). Again, all points which I was assuming our sollicitor would take care of, and part of why I’m currently disappointed.

G_M

Seems to me the OP's problem here is not so much what the Deed should say, but how to get proper advice and value for money from the solicitor who is (supposedly) drawing up the Deed on his behalf (or copying back the draft the OP has provided!)

If it were me, I would be insisting, for my £300, that an appointment is set up and the solicitor listens to the OP's requirements, discusses the issues, recommends the solution, and then draws up the Deed.

I would not agree to Exchange till this had happened.

WeB

Thanks GM. I probably should've sought advice on this before exchanging. However, I must add that if we did not echange by a set date, the seller said he would relist the property. So we might've still been in this situation. I've sent the solicitor a note, hopefully he'll manage to do something prior to completion. Seems like I'm not in the best position to negotiate though.

Richard_Webster

The most importnat thing is that both of hyou understand all the implications - and you actaully go through some scenarios of what might happen. You say to the solicitor: "If such and such ahppened and the property went up/dowmn in value and X had only contributed Y % of the outgoiungs what would the deed mean?

Obviously I've only written in vague terms but for couples doing deeds of trust how they share the outgoings and the mortgage paymetns and how they reconcile the size of capital injection by each of you against the monthly payments are importnat factors.

For instance a common suggestion is that if theproeprty is sold each party gets out the capital they put in and then the balance is shared 50/50 on the basis that they have been paying the mortgae and outgoings 50/50. Then if the sale proceeds are not enlugh to proviude these figures it is suggested they share the loss equally. Fo rinstance if X puts in £50K and Y £10K and they only have £30K left over after a sale then X is entitled to £35K (£50K-£15K) and Y has to pay X the £5K from his own resources! Y may say that it isn't fair and the fact that he/she has being paying half the mortgae for Z years should count for something.

I prefer an alternative formula - that all the amounts paid by each party (initial capital and contributions to mortgage) are added together and then any money left over from a sale is divided in proportion to those payments. You can even include payments for other outgoings etc. Downside is you have to keep records and preferably each sign a note every 2-3 months recording the cumulative totals paid by each up to that time.

The point about the relative strnegth of negotiating positons at the time of a dsipute is important. For instance if the couple split and one wants out so he/she can buy with someone else then the party staying will know that and the one going may have to accept less than they really ought to be entitled to. (Second couple's lender won't want either being on another mortgage.)

Opoosite considerations apply if one disappears leaving the other unable to sell. Eventually contact is made through firends of friends and the absent party says that he/she will sign if the one who wants to sell pays over the odds.

I hope that people wouldn't take advantage of each other like that but sadly solicitors have to assume that everybody is a toerag when giving this kind of advice - otherwise they get claims alleging that someone was never told that such and such might happen.

However whatever you do the most important thing is that you both completely understand - and however simple the ultimate agreement/deed the time taken in understanding is most important and that is what you should be paying for.