Trust deed apportionment, unequal deposit, equal ongoing payments

getmore4less

emjay2kay said:

carl0s said:

Here are the facts:

• Property purchase price £635,000
• John putting in £220,000
• Sarah putting in £150,000
• Mortgage of £265,000, to be paid 50/50. All other things equal going forwards.
• Not married, no children, neither planned.
• Tenants in common.

I have suggested:

• 58% to be split 59.5% John and 40.5% Sarah
• 42% to be firstly used to clear any outstanding mortgage, then split equally between John and Sarah.

the equal contributions going forwards in terms of the mortgage payments.

Think you could achieve this just by simplifying it a bit.

"After payment of any outstanding mortgage, legal, sellers fees and taxes, the proceeds of any sale do be apportioned as follows:
- the first £370,000, 59.5% in favour of John and 40.5% in favour of Sarah;
- the remainder be divided equally.
- All shares held as tenants in common"

If you're looking to get more complicated than that and see returns on your deposits then you're going to have to pay a solicitor who specialises in trusts to set up something for you.

That is just get your deposits back, 

The equivalent of lending the the smaller deposit  £35k(interest free) from the higher deposit.

getmore4less

What you get out is what the place achieves after all expenses before the debt is paid off.

the shares of that are  
J = 220/635  = 34.65%
S= 150/635 = 22.62%
J+S 265/635 = 41.73%  split 50:50

You then pay 1/2 the debt from your share.

Much easier if you separate the debt from the ownership   

pretend you borrowed the money from your parents and paid cash.

When you sell you get your share and pay the debt back from that, 

just because it is a mortgage you don't need to change that algorithm.

MWT

Can also express it like this for ease of writing into agreement:

John (41.73% of house value - amount required to repay mortgage) / 2 + 34.65% of house value

Sarah: (41.73% of house value - amount required to repay mortgage) / 2 + 23.62% of house value

That works for positive and negative equity at any point.

carl0s

I think I follow you both. I am just running my head around it

carl0s

You nailed it, thank you both!

carl0s

Solicitor is writing it up and has just come back with:

"You could say that you each get the first 35% and 24% of the net sale funds and the balance 50/50"

does that achieve the same? or does that not help in the negative equity scenario?

edit: I've stuck it in a spreadsheet and it does work. I think her use of the word 'net sale funds' there might have been questionable but that's not what she's put on the draft deed.

getmore4less

carl0s said:

Solicitor is writing it up and has just come back with:

"You could say that you each get the first 35% and 24% of the net sale funds and the balance 50/50"

does that achieve the same? or does that not help in the negative equity scenario?

edit: I've stuck it in a spreadsheet and it does work. I think her use of the word 'net sale funds' there might have been questionable but that's not what she's put on the draft deed.

Only if it documents sale before paying off the mortgage and the mortgage comes from the 50:50 bit.

Don't forget you don't pay everything equal just the mortgage. 

MWT

carl0s said:

Solicitor is writing it up and has just come back with:

"You could say that you each get the first 35% and 24% of the net sale funds and the balance 50/50"

It works, but to be accurate it really should be 34.65% not 35% and 23.62%, not 24%.

Rounding them off does not correctly reflect how you funded the purchase.

carl0s

Noted on the percentages, but I think we're probably OK with the rounding really.
The actual wording has been set out like this:

 

 1. DEFINITIONS

In this Deed the following terms shall have the following meanings:
‘Property’ means the property described in the schedule and where the context so permits or requires any part of it.
‘clause and ‘schedule’ mean respectively clauses or schedules in this Deed unless the context shows a contrary meaning,
‘now’ and ‘today’ means at this date of this Deed.
‘parties’ means the parties to this Deed.

 

2. BACKGROUND

2.1 Party 1 and Party 2 have today completed their purchase of the Property for the purchase price of six hundred and thirty five thousand pounds (£635,000).

 The parties acknowledge and confirm that each have made the following contributions towards the initial purchase of the Property, as follows:-

 Party 1 Two hundred and twenty thousand pounds (£220,000) the initial deposit (plus one half of the cost of the solicitors fees, disbursements and stamp duty land tax)

Party 2 One hundred and fifty thousand pounds (£150,000) the initial deposit (plus one half of the cost of the solicitors fees, disbursements and stamp duty land tax)

 

The initial mortgage advance being two hundred and sixty five thousand pounds (£265,000).

 

Party 1 and Party 2 confirm that they hold the Property on Trust between them for the initial proportions as to:-

Party 1: 35.00%

Party 2: 24.00%

The balance proportions being 50/50 as to Party 1 and Party 2.

3. BENEFICIAL INTERESTS

3.1 The parties shall hold the Property and the net proceeds of the sale and the income deriving from the Property, on trust for themselves being 35.00% for Party 1 and 24.00% for Party 2 and the proceeds thereafter shall be held as tenants in common in the following shares:

 

Party (1) John 50.00%; and

Party (2) Sarah 50.00%

 

3.2 The proportions set out in Clause 3.1 shall not be affected by the marriage of the parties to each other, birth of a child between them or separation and the portions shall stand.

 

3.2 It is not the intention of the parties that in the event of the death of one of the parties, the deceased’s share in the property will pass to and be held by the surviving party. The deceased’s share will pass in accordance with the deceased’s will, if any, failing which, by the rules of intestacy.

carl0s

I'm still not sure about the "The parties shall hold the Property and the net proceeds of the sale and the income deriving from the Property, on trust for themselves being 35.00% for Party 1 and 24.00% for Party 2". Aren't the 'net proceeds of the sale' the proceeds after clearing the mortgage? That would suggest that if we sell tomorrow for the same price we bought it for, John would only get 35% of the initial £370,000, when it should be 35% of the sale price (£635,000).

Or am I misunderstanding?

Although: it does say "the Property *and the net proceeds of sale and income deriving from*", which actually sounds correct.