Deed of Trust wording

Guest101

quickoldfart wrote: »

Because that was not the question asked !

Basically her options are pay me rent or pay towards the mortgage, we have chosen the Latter! what I have asked advice on is how to word the declaration.

By paying rent she would be getting a beneficial interest anyway.

quickoldfart

Guest101 wrote: »

By paying rent she would be getting a beneficial interest anyway.

I realise that now,
thank you

TBagpuss

Pixie5740 wrote: »

Well if she pays you rent which is over and above half the household bills excluding the mortgage then she will be contributing towards the capital repayments of the mortgage and will start building up a beneficial interest in the property regardless of any deed of trust.

Not necessarily. If she pays 'rent' then she *may* build up a beneficial interest in the property, dependent on the full circumstances and any agreements, implid or explicit, between them. It is perfectly possible to agree that contributions will not give rise to beneficial interest, the the burden of proving that they have is on the person seeking to cliam the interest.

It is, of course, alsways more sensible to have a written agreement so that both parties are clear about their intentions and expectation.

Guest101

TBagpuss wrote: »

Not necessarily. If she pays 'rent' then she *may* build up a beneficial interest in the property, dependent on the full circumstances and any agreements, implid or explicit, between them. It is perfectly possible to agree that contributions will not give rise to beneficial interest, the the burden of proving that they have is on the person seeking to cliam the interest.

It is, of course, alsways more sensible to have a written agreement so that both parties are clear about their intentions and expectation.

You cant account for court decisions unfortunately. Even the most detailed agreement can be thrown out.

LittleMax

quickoldfart wrote: »

So I would value any opinions what is fair for both of us?

Thanks in advance

Pete

What is fair to both of you is something that you both agree on. It may not seem fair to the rest of us, but it's what works for you as a couple.

In terms of persuading your partner that a percentage split is fair rather than a set amount, I would cost out some examples and show her what you would each be left with if you were to split up. So house prices dropping, staying the same and rising.

Out of interest - why are you keeping the flat out of the equation? You can of course tell me to mind my own business. But it seems unfair to me to keep it totally separate, when you are pooling resources on your house.

quickoldfart

LittleMax wrote: »

What is fair to both of you is something that you both agree on. It may not seem fair to the rest of us, but it's what works for you as a couple.

In terms of persuading your partner that a percentage split is fair rather than a set amount, I would cost out some examples and show her what you would each be left with if you were to split up. So house prices dropping, staying the same and rising.

Out of interest - why are you keeping the flat out of the equation? You can of course tell me to mind my own business. But it seems unfair to me to keep it totally separate, when you are pooling resources on your house.

So far I have only shown illustrations of prices going up and not the scenario of if it went down.

From a personal point of view, I had to pick myself up after my ex wife walked out of a 25 yr marriage, so I am very cautious what I do with my share of the current property, in the back of my mind it is earmarked to pass down to my children, which is why I want to ring fence it as a percentage.

re: the flat not being included, good question? answer I dont know.

saajan_12

Did you post with your partner / is she reading this? If not, I don't see what difference hearing more people agree with you will make.

For the record, I agree the fairest way is to treat everything as %s so your equity as well as the mortgage value rise/fall with the house price, rather than hard code your portion as 227k. You are contributing / responsible for 301k (80%) and you partner 74k (20%) plus interest. I think you should be entitled to 80% of the profit/loss.

quickoldfart

saajan_12 wrote: »

Did you post with your partner / is she reading this? If not, I don't see what difference hearing more people agree with you will make.

For the record, I agree the fairest way is to treat everything as %s so your equity as well as the mortgage value rise/fall with the house price, rather than hard code your portion as 227k. You are contributing / responsible for 301k (80%) and you partner 74k (20%) plus interest. I think you should be entitled to 80% of the profit/loss.

I have sent her the link so she can see all the comments, and if the underlying advice is the percentage route then hopefully that will be considered, as it certainly seems fairest to me.

Many thanks to everyone that has commented.

Hoploz

Sounds a bit messy but any agreement could be messy

Just wanted to add, there has recently been a case of a property being in trust in my husband's family, and it hasn't turned out quite as we expected...

Wife was ill, put her half of house into trust to protect it for their 3 children in case husband remarried after she died, which in fact he did. The trust was valued at half the house's value at the point the wife died (£212k) Apparently the trust had to state a valuation figure rather than a percentage.
Now the husband has died, his half passed to new wife. Trust is being dissolved. Children understand the wife must buy out the trust at £212k to own the other half. There's more to it, stupidly complex in fact.... But...

Turns out, the £212k is actually NOT to buy a half share, but rather the house is now worth more, so the £212 is now only about a third (loosely, it's not resolved yet)

Point I'm making is, we all understood that the FIGURE represented a 50% share. But when it came down to it, that was not the case, the new valuation was taken into account. So you may find this could happen to you - make sure you are all clear that legally either a percentage is agreed on OR an amount .... Or things may end up different to what you thought you'd agreed.

bowlhead99

I have to say, your way appears fair enough.

You currently have an investment of 60% equity in your house and a valid expectation that if the market rises, that £227k of value rises whether or not you or she or both of you have been paying off the rest of the mortgage principal. To say that you volunteer to lock in to 'only' £227k of value for that equity now and if the house doubles in value to £750k over the next year or two, you don't want to carve out 50% profit on your £227k and take that first, you will instead let her have 50% of the entire value increase on the whole house, even though she has only paid a few thousand pounds of mortgage principal... that sounds crazy.

You would effectively be saying that your £227k was an interest free loan made by you, to the two of you, and you didn't want a return on it. Even though the £227k is clearly equity in a house and it's the very existence of that contribution of your life savings in the form of equity which is allowing the two of you to access a low LTV(40%) cheap mortgage.

So, if you are going to write a deed of trust that shares the upside of that £227k equity with her, and she has another property somewhere else... is she going to write a deed of trust for that property that shares all the upside of her existing equity in that with you? If so, you are truly pooling resources and investment returns as a couple. If not, then you should say that the 60% of your property that you've already paid off, is going to stay as your equity, and you want all the market value gains on that piece of the equity... and the amount that is available for her to 'buy into' is only the 40% currently financed by the bank - she can take half the rights and obligations of that 40% if she wants to, by paying half the mortgage.

Even taking half the mortgage and half the upside on 'her' 20% is a pretty sweet deal for her, because 'her' 20% currently has a 100% mortgage on it, so her return will be highly geared.

For example, month one, she has no cash down and a £74k mortgage. Month two, she has (say) £400 down and a £73.6k mortgage. Month three, she has £800 down and a £73.2k mortgage and so on. By month 6 she has £2k down and a £72k mortgage (out of the £144k mortgage). Then you decide to sell the house because it's gone up by 10% total from today's price and you both fancy pooling your resources somewhere else after you both sell your current properties.

The house gets sold for £412.5 and after clearing the remaining £144 k mortgage there is £268.5 of cash. You would presumably want to take your £227k and the 10% gain on the £227k in line with the market movement since today's valuation point, which is about £250k total. That leaves £18.5k to split down the middle. She gets over £9k, having only contributed £2k over the period since this arrangement started. That's 300% gain on the money she put in, while you get a similar return on your 'new money' contributed but are only asking for 10% gain on the initial £227k you put in.

Anyone who says that is unfair on her, is crazy. It is a very nice deal for her because it gives her access to your property price growth when her 20% slice is virtually 100% mortgaged and your initial 60% slice is effectively zero percent mortgaged and just giving mundane unleveraged growth. It is especially nice for you to offer her that deal when she is not giving you any of the upside of her other separate property when that appreciates over time.

In her method, you would just take out your £227k from the proceeds without the 10% valuation uplift - so after clearing the mortgage out of the sales proceeds and paying yourself your £227k there would not just be £18k to split, there would be more like £40k to split, giving her £20k for a £2k contribution: £18k profit and a 900% return.

That would be a nonsense of an investment for you, particularly as you have committed your property (your biggest asset) to this one-sided arrangement while she keeps her own personal property and investments entirely out of it and doesn't give you the upside of them.

I would agree you might want some downside protection on your £227k for the case where the market falls instead of rises.

There is nothing to stop you protecting yourself in that regard by saying:

if the net proceeds of house sale is under £375k you have a priority entitlement to the first £227k to the extent it is available after clearing the mortgage and then split the rest 50:50 ; and

if the net proceeds of house sale is over £375k you have a priority entitlement to an amount equal to (£227k times (saleprice divided by 375k)) and then after clearing the mortgage split the rest 50:50.

That would mean in a major loss situation it would get you back as much of the £227k as possible leaving both her and you with nothing for your respective contributions made from December 2016 onwards. While if it sells for more than £375k you get a fair market return on your initial equity and you are both splitting the profits on the new money that has been put in since.

There are a myriad of ways you could construct this. For example you could just do a simple count of the total cash that has gone in from today, counting your existing equity as a £227k day one contribution. Then next month you both pay £400 of mortgage principal. Then the month after you both pay another £400 of mortgage principal and so on. After a while you will have each paid £2k of mortgage principal leaving the total contributions as £227k:£2k:£2k and gives you a basis for splitting the total proceeds after clearing the residual mortgage, in proportion to contributions.

If you sold the house for £412.5k at that point as in the first example, and had £268.5k to split after settling the £144k mortgage, you could split in the ratio 227/231 for you on your old contributions, 2/231 for you on your new contributions, and 2/231 for her on her contributions. This would see her get 2/231 x 268.5 = £2.3k. This is a far cry from her getting £9k cash or £20k cash in the other methods.

Someone without a vested interest might say that is fair, and in fact it is more than fair because it doesn't give you any extra credit for the time value of money, with your 227 going in on day one and her money only being dripped in over a later time period and still being counted pound for pound as a contribution. However, others would say it is unfair on her because she is paying half the mortgage interest on top of the contributions, not just 2/231 of the mortgage interest, and she would expect some kind of leveraged return rather than just getting a simple percentage share of all the profits.

So, lots of ways to do this. Unfortunately the bottom line that you'll find is that men will do pretty much anything for sex, so she is likely to get a good outcome when you negotiate. :rotfl:

By letting her pay off part of your mortgage rather than a nominal contribution to bills, and agreeing to give her half the upside of the 40% mortgaged slice of the property, you will give her literally thousands of pounds of upside on the value of the 'family home', without taking upside on her other property for yourself, and find some way of internally justifying it to yourself as fair, if you go out of your way to keep things amicable at your own expense. But if you have an eye on long term property price appreciation, don't go further and fall into the trap of turning your £227k equity into an interest free loan - or even an interest paying loan, and cutting yourself out of all the expected profits on those existing life savings.