Renovation dispute

tonyt2

Hi,
I'm just looking for some advice and some opinions about the following matter. (hopefully this is in the correct topic) Also have rounded figures to try and make it more simple.
My partner and I went into a renovation project with my parents. With the agreement being that upon sale, everyone would take out the money they invested, and an profits would be split.  We had no decision making for the project and the agreement was that our investment would be put towards the mortgage 

The total invested into the project was 300k.  Of that 30k was our money.  270k was the family members.

Unfortunately the project made a loss. And of the 300k total investment- the project returned 270k. So a 30k loss.

I'm just looking for opinions on how this 30k loss should be split across the two parties involved? 
Thanks in advance for any advice

Doozergirl

10% of the loss, I guess. 

As would have been 10% of the profit.  

tiggerbodhi

How did you agree to share any profit? for example proportionally with the investment or straight 50/50? If the project had made £30K profit would you have expected £15K or £3K?
Proportionally if the the project made a 10%  loss you would lose 3K so you get £27K back, but 50/50 you would lose £15K.
It seems fair you share the risk evenly on loss or profit.

Gilead

Did you have an agreement in place as to what would happen if there was a loss? If not, why not?

As @Doozergirl said, on the face of it I would have thought any loss would be an equivalent percentage of your investment. However, you did mention if it was in profit you would have 'split' it - that sounds like you meant you would split any profit 50% between the two parties. Are you worried that you will be requested to split the loss, i.e. you have to eat £15k?

tonyt2

Gilead said:

Did you have an agreement in place as to what would happen if there was a loss? If not, why not?

As @Doozergirl said, on the face of it I would have thought any loss would be an equivalent percentage of your investment. However, you did mention if it was in profit you would have 'split' it - that sounds like you meant you would split any profit 50% between the two parties. Are you worried that you will be requested to split the loss, i.e. you have to eat £15k?

No agreement on any loss no. We were naive as it was with family.
Of the profit the split would have been 25% - 75%. But we were cut out of any decision making and have now found out that credit cards were used for some of renovation work. So 10k of the total investment was to service debt, something that wasn't agreed on. Then the property was listed 75k higher than the estate agents estimate me and my partner had, meaning it took a couple of years to sell- which is where the loss came from-. Messy I know!

Yes. We have been requested to eat half of the total loss. 15k

tonyt2

tiggerbodhi said:

How did you agree to share any profit? for example proportionally with the investment or straight 50/50? If the project had made £30K profit would you have expected £15K or £3K?
Proportionally if the the project made a 10%  loss you would lose 3K so you get £27K back, but 50/50 you would lose £15K.
It seems fair you share the risk evenly on loss or profit.

Thanks for the reply. This is where it gets a bit complicated. Profit would have been split 25/75, bu no agreement was made on loss.
We had no control over budget or decisions, even though the original agreement was that we would co manage it. The project was also partly done on credit cards, something we we're not aware of, adding 10k in interest payments to the budget.  And the property was listed at 75k more than the valuation my partner and I had and requested- meaning it took 2 years to come back down by 75k and finally sell- during which time it went from profit to loss.

We've been asked to cover half of the overall loss. 15K

foxy-stoat

..........

foxy-stoat

tonyt2 said:

tiggerbodhi said:

How did you agree to share any profit? for example proportionally with the investment or straight 50/50? If the project had made £30K profit would you have expected £15K or £3K?
Proportionally if the the project made a 10%  loss you would lose 3K so you get £27K back, but 50/50 you would lose £15K.
It seems fair you share the risk evenly on loss or profit.

Thanks for the reply. This is where it gets a bit complicated. Profit would have been split 25/75, bu no agreement was made on loss.
We had no control over budget or decisions, even though the original agreement was that we would co manage it. The project was also partly done on credit cards, something we we're not aware of, adding 10k in interest payments to the budget.  And the property was listed at 75k more than the valuation my partner and I had and requested- meaning it took 2 years to come back down by 75k and finally sell- during which time it went from profit to loss.

We've been asked to cover half of the overall loss. 15K

You should really pay 25% of the loss - if you were only ever going to get 25% of the profit.
As nothing in writing expect to fall out with the other family members involved.....money and family/friends eh?

pramsay13

If the profit split is 25 / 75 then surely that has to be the same for any loss. 
Not sure why it would be a 50 / 50 split.

tonyt2

foxy-stoat said:

tonyt2 said:

tiggerbodhi said:

How did you agree to share any profit? for example proportionally with the investment or straight 50/50? If the project had made £30K profit would you have expected £15K or £3K?
Proportionally if the the project made a 10%  loss you would lose 3K so you get £27K back, but 50/50 you would lose £15K.
It seems fair you share the risk evenly on loss or profit.

Thanks for the reply. This is where it gets a bit complicated. Profit would have been split 25/75, bu no agreement was made on loss.
We had no control over budget or decisions, even though the original agreement was that we would co manage it. The project was also partly done on credit cards, something we we're not aware of, adding 10k in interest payments to the budget.  And the property was listed at 75k more than the valuation my partner and I had and requested- meaning it took 2 years to come back down by 75k and finally sell- during which time it went from profit to loss.

We've been asked to cover half of the overall loss. 15K

You should really pay 25% of the loss - if you were only ever going to get 25% of the profit.
As nothing in writing expect to fall out with the other family members involved.....money and family/friends eh?

Makes sense.  
I was only half completed and I guess the fact that we we're cut out of the project while we saw it being mismanaged (put on credit cards instead of using our money) and stopped from listing it at a reasonable price to begin with is clouding my judgement.  Also it stopped us from buying own own property at the time!

Ah well. ''Expect'' to fall out? One step ahead of you

foxy-stoat

Ask to see all the paperwork and invoices from start to finish, make sure the numbers work out.  Then transfer £7,500....and dont do it again !