Tenants in Common advice please!

Danny1892

Hi

I'm hoping someone can provide some advice. I'm in the process of buying my first house and moving in with my girlfriend. The house needs a lot of work done to it.

I'm putting down a 30k deposit and estimate that the cost of work being carried out to be about 20k which I'm also paying alone. Mortgage will be 85k. She's not putting anything towards the house, but we will be halving the mortgage repayments. So basically I want to an agreement in place to say that I will receive 50k + half the equity of the house, should we split up.

This is the part that is confusing me. I've heard of a Tenancy in common agreement and a declaration of trust. Are the two things different? Do I need both? What would be my best course of action?

Any help would be greatly appreciated

booksurr

there are 2 ways of dealing with unequal deposit situations, each carries downsides

1. you are protecting the full value of your 50K meaning your GF takes a disproportionate share of any fall in value since she gets half of all falls whereas your get half of all falls less 50k. On that basis you do not need TIC. A declaration of trust would establish the grounds on which you get back your 50K and the property can then be held as joint tenants since you each share half of it. Your GF may consider that "unfair" on her since she pays as much mortgage as you do but you would get back your 50K so she would lose more than you in relative terms

2. the alternative is that your 50k buys you a greater share of the property than she owns. So your stake is 50 + 85/2 = 92.5 and her stake is simply 85/2 = 42.5. Obviously that calculation assumes she is happy for you to claim the 20k as part of the total purchase cost which is thus 135k and would mean you own 68.5% whereas she owns 31.5%. In that case you would need to be tenants in common with those stated shares

as TIC with unequal shares you obviously would be exposed to more risk in terms of price falls, but get more reward if prices rise. If that risk scares you then you could be harsh on your GF and impose a declaration of trust over and above the TIC share, so that you still get back 50k out of any equity in the property, and only then is the remainder divided up as 68.5% and 31.5%. Your GF may consider that as "unfair" on her however.

remember disputes over finances are a sure way to ruin a relationship so whatever you decide make sure she understands the implications and agrees to them now so she cannot complain later

Danny1892

Thanks for the prompt reply, that clears a few things up. I think option 1 would be more suitable. We have discussed it and she's happy to agree to it as she knows it's fair. I don't want to be harsh on her but I'd rather just protect myself and make sure she gets half of everything she would potentially be entitled to.

I'm assuming a declaration of trust would cost £? I don't suppose you know a ball park figure?

Cheers

getmore4less

So you want to lend the GF 1/2 the money you are putting up interest free?

That's what a get your deposit back is.

better/alternative way is to use equitable interest in the property. by deposit and debt serviced.

Don't forget any trust deed/wils should cover all scenario not just the ownership.

death, new partners, kids, can't pay, won't pay....

p00hsticks

If you go with option 1, what happens if there's less that 50k equity when you come to sell ?

DandelionPatrol

Danny1892 wrote: »

Thanks for the prompt reply, that clears a few things up. I think option 1 would be more suitable. We have discussed it and she's happy to agree to it as she knows it's fair. I don't want to be harsh on her but I'd rather just protect myself and make sure she gets half of everything she would potentially be entitled to.

I'm assuming a declaration of trust would cost £? I don't suppose you know a ball park figure?

Cheers

By going for option 1 on the basis of what happens if the value has fallen, you are transferring half of any rise in value on that £50000 to your partner.

Although it is harder to get your head around it, option 2 is definitely fairer.

antrobus

Danny1892 wrote: »

...I'm assuming a declaration of trust would cost £? I don't suppose you know a ball park figure?
..

Or you can just submit Land Registry form JO, depending on how complicated you have made the arithmetic.

http://www.lawsociety.org.uk/support-services/advice/practice-notes/joint-ownership/#jo412

class2ldn

We've had a similar issue on what to do with this.
My partner and I are not married but we are engaged and we've decided to do joint ownership. However I think it may be the wrong thing we've done.
I've got a daughter from a past relationship. If we done tenants in common and I died how would my half be passed to my daughter while still allowing my partner to remain in the house? Would the equity in the house just be halved?

DandelionPatrol

class2ldn wrote: »

If we done tenants in common and I died how would my half be passed to my daughter while still allowing my partner to remain in the house?

You do this with a will. Leave your half to your daughter and give your partner a lifetime interest. And I think you can get the will registered without waiting to die, which would be a good thing to protect your daughter's interest.

class2ldn

So if we had kids just say 2 for example, what would be the best way to go in that situation if i died first?
What I meant was does my daughter get a cash sum for my share when I die? If my partner wanted to sell at that point I assume she would just get back her half from the sale?

class2ldn

We done joint because we thought if we had kids then it's fairer because if we have kids then noone gets any of the house until my partner dies and then it can be shared between all the kids.
Seeing as we dont know if we are having any kids then we thought it was the easier option. Can tge share in the house be changed quite freely. Could I allocate my 50% to my daughter but if we had kids could I then split it evenly between them so if we had 1 more then it could be that each one get 25% each of my share and the rest once my partner dies?