Tenants in common split query

tom4blues

Hi all,

Just a quick one, hopefully someone can help regarding the tenants in common split calculation i am trying to do. In addition to the deposit, the money for renovations is coming from one of us.

I am only thinking of doing it this way due to the potential rise in house value once renovations can be made, we have been told it should add money on straight away pretty much.

However would i be correct in saying that this would be fair moving forward, only as it would be money coming from one of us that would improve the house and its value. A deed of trust would not encompass this fairly to take into account the added value that the renovations budget would give.

Could somebody please take a look at these workings which try and calculate a split? Have based this slightly on other forum posts i have seen. Any help would be much appreciated, and if there is a better way to do it could you please show your workings?


£167,000 Value
£16,700 Deposit
£14,000 Renovations

£150,300k mortgage to be paid 50:50
Total (deposit included): 181,000

Total Outlay: A
£75150 Mortgage
£16,700 deposit
£14,000 renovations money
Total: £105,850

Total Outlay: B
£75,150 Mortgage
Total: £75,150

Purchase and renovations Split:
A: 105.85/181 or 58.48%
B: 75.15/181 or 41.52%


Is it just me or does an 8.48% increase in split seem small considering £30,700 would be coming from one party? I am confused a little and need to get back to the solicitors with what we want to do.



Any help is greatly appreciated!

antrobus

tom4blues wrote: »

....A deed of trust would not encompass this fairly to take into account the added value that the renovations budget would give....

Yes it could, you can define any split you like in a trust deed.

tom4blues wrote: »

.... Any help would be much appreciated, and if there is a better way to do it could you please show your workings?

Person A is contributing £16,700 + £14,000 = £30,700 or 16.96% of the total cost of £181,000. The balance of £150,300 is being funded by a mortgage for which both person A and person B are equally responsible.

Thus person A would get 16.96% of any future sale proceeds as a return on their investment. The balance of 83.04% is allocated to repaying the mortgage, and any surplus is split 50:50.

tom4blues

antrobus wrote: »

Yes it could, you can define any split you like in a trust deed.

This is party where there is a slight bit of confusion, i am under the impression that a deed of trust is utilised well where there is a unfair split on money, and therefore a claim to a certain amount upon sale, however in this situation there is that but also the wish to proportion the split to take into account any future value rises in value as a result of the renovations money being invested into it.

There is also a cost attributed to taking a deed of trust out, whereas i am under the impression that a split can be written into the contact docs (at some point don't know where exactly), therefore giving the legal side of having a split but also saving on the cost of a deed of trust if we don't exactly need one.

antrobus wrote: »

Person A is contributing £16,700 + £14,000 = £30,700 or 16.96% of the total cost of £181,000. The balance of £150,300 is being funded by a mortgage for which both person A and person B are equally responsible.

Thus person A would get 16.96% of any future sale proceeds as a return on their investment. The balance of 83.04% is allocated to repaying the mortgage, and any surplus is split 50:50.

I have arrived at this figure previously, and now i read it, that does make sense! Thanks you!

getmore4less

It is really a 17% difference.

If you want the renovation money to represent the increase in value you need to separate that out and get a second valuation when the work is done and apportion the rise to renovation and general increase.

tom4blues

I have spoken with my solicitors and we are looking at going in together to go over it, at least now i have some figures to work with that have been explained in a straightforward manner, so thank you both for your input.