Declaration of trust in negative equity sale

anselld

AdrianC wrote: »

Very clear.
It clearly states it only relates to the BALANCE of the NET PROCEEDS. No other monies.

The balance and net proceeds are negative. Mathematically it still works.

As there is nothing else written in the deed under the circumstances why should a negative balance be written off?

Tom99

[FONT=Verdana, sans-serif]You could probably argue about the terminology all day.[/FONT]
[FONT=Verdana, sans-serif]The net balance is positive, its the 'remaining balance' which might be negative.[/FONT]
[FONT=Verdana, sans-serif]The net balance is £35,500, then:[/FONT]
[FONT=Verdana, sans-serif]'The first owner shall receive £40,000'[/FONT]
[FONT=Verdana, sans-serif]But £40k is not there and there is no provision for the second owner to add to the net balance.[/FONT]
[FONT=Verdana, sans-serif]Therefore the first owner can only receive £35,500 meaning the remaining balance is £0.[/FONT]

elsien

Where did you both get your sale price ideas from? Have you actually had any valuations? Seems to me that would be the starting point, otherwise you're arguing over a figure with nothing to back it up either way.

Red-Squirrel_2

Don’t forget you will both have to pay estate agent and solicitor fees for a sale.

AdrianC

The balance of the net proceeds, at that point, is definitely currently positive - it's just less than £40k.
The balance of the net proceeds cannot ever be -ve, because that would mean the solicitor has paid out more than is available.


In the OP's example...
The first owner and the second owner declare that they hold the property on trust for themselves as tenants in common to sell the same with the power to postpone the sale and to hold the proceeds of sale
Proceeds of sale = £170k
(after deducting therefrom the costs of sale)
Costs of sale = ~£4k <wet finger in air>
Balance = £166k
and
(a) to discharge the mortgage
Mortgage = £132k
Balance = £34k
(b) as to the balance of the net proceeds of sale:
The first owner shall receive £40,000.
Not possible. First Owner receives £34k.
Balance = £0
The remaining balance of the net sale proceeds shall be split equally between the parties.
No remaining balance to split.

If there genuinely was -ve equity
The first owner and the second owner declare that they hold the property on trust for themselves as tenants in common to sell the same with the power to postpone the sale and to hold the proceeds of sale
Proceeds of sale = £125k
(after deducting therefrom the costs of sale)
Costs of sale = ~£4k <wet finger in air>
Balance = £121k
and
(a) to discharge the mortgage
Mortgage = £132k
Not possible. Lender receives £121k.
Lender still owed £11k. (Lender can pursue borrowers jointly and severally under terms of loan contract, outside of declaration of trust)
Balance = £0
(b) as to the balance of the net proceeds of sale:
The first owner shall receive £40,000.
Not possible. First Owner receives £0.
Balance = £0
The remaining balance of the net sale proceeds shall be split equally between the parties.
No remaining balance to split.

ACG

If you can not have a conversation, why not just send her a text and say if we sell for £170k after costs there will be £35k left, if we sell for £180k you will get your full £40k back with a little on top. Are you sure you still want to sell for £170k?

Maybe if you have a joint friend who can act as a mediator?

Leave it up to her to decide, your going to come out with next to nothing anyway and for the sake of a grand or 2, I would just go with whatever is easiest.

If she wants you out of her life, I would be surprised she will take you to court over £4k that she might not even win. You can see on here people are debating the contract so it is hardly water tight for this situation.

AdrianC

ACG wrote: »

If you can not have a conversation, why not just send her a text and say if we sell for £170k after costs there will be £35k left, if we sell for £180k you will get your full £40k back with a little on top. Are you sure you still want to sell for £170k?

There's a difference between the expected sale price, and what the property actually sells for.


The second of those - the only one that actually matters - is totally outside the OP + ex's control. It's entirely dependent on what putative buyers are willing to pay.

foxy-stoat

anselld wrote: »

I would agree the wording is weak, but the intent is clearly to protect the £40k and distribute any gain equally and by extension any loss. Hence I would expect OP to contribute £2250.

Apart from anything else why should OP walk away unscathed from a neg equity sale? What if the loss was £40k would the OP still expect to walk away?

Also OP, you do not say if you are/were married, in which case the DOT may well prove irrelevant.

Surely the best approach would be to at least test the market at £180k or even £175k to avoid the issue arising.

The Trust Deed was set up to protect the £40,000 - nothing more.

The other way would of been to work out the percentage of the £40,000 was against the purchase price and written the "protection" in percentage terms.

Either way the £40,000 is not there as the property looks like it will be sold lower than the minimum required to recover the £40,000 (after fees).

I would of thought that both of them should be holding out for a sale price of the minimum so the ex doesn't lose out - forgetting about the capital repayments for the both of them.

I dont think the OP should be making up any shortfall out of his own pocket in this situation - its just unfortunate that if they agree to sell at £170K then the person who put in the deposit will lose out - they really should not be taking offers lower than £175K by the sounds of it.

ACG

AdrianC wrote: »

There's a difference between the expected sale price, and what the property actually sells for.


The second of those - the only one that actually matters - is totally outside the OP + ex's control. It's entirely dependent on what putative buyers are willing to pay.

Agreed, but I can only work off the figures provided. The property could be worth £50k or £500k I have no idea.

Thrugelmir

foxy-stoat wrote: »

forgetting about the capital repayments for the both of them.

Is the mortgage interest only? If it were on a repayment basis you'd expect an element of equity to be left.