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Calculating split of property ownership - Please Help!
Boofer_Ise
Posts: 8 Forumite
Hi,
Apologies if this has been raised before but I have checked through a number of previous posts and could not find anything that addresses my particular issue!
I have bought a property four years ago with a friend for which we paid a 10% deposit, and the remaining 90% was via a mortgage which has in every respect been / is being paid jointly and equally.
During the four year the value of the property has increased and we are now looking to go our separate ways.
The problem that we have though is that our individual portion of the 10% deposit was unequal and agreeing what the ownership split of the property is, is proving rather difficult with us both disagreeing as to what it should be.
I would suggest that each ownership percent could be worked out as simply half the 90% mortgage (ie 45%) plus the split of the deposit. If this was eg 2% and 8% then one would own 47% and the other 53% of the property.
Is anyone able to confirm if this is correct?
The reason that I ask is that my friend whom I purchased the property with contends that the mortgage is paid to the mortgage company and is therefore not on the property itself whereas the deposit was and should therefore constitute the property ownership split ie 2% and 8% become a 20% and 80% ownership split. Is this correct?
If this is the case then it appears that this friend has deceived me from the very beginning and I am going to lose a lot of money over this.
Does anyone know, maybe from previous experience, if this went to court how the mortgage will be viewed? From the very beginning I always seen the mortgage as a loan that we took out jointly to purchase the remaining 90% of the property, we have paid everything equally and therefore we both own half of that 90%.
At the moment I'm just exploring options and any help/advice regarding this would be most appreciated!
Apologies if this has been raised before but I have checked through a number of previous posts and could not find anything that addresses my particular issue!
I have bought a property four years ago with a friend for which we paid a 10% deposit, and the remaining 90% was via a mortgage which has in every respect been / is being paid jointly and equally.
During the four year the value of the property has increased and we are now looking to go our separate ways.
The problem that we have though is that our individual portion of the 10% deposit was unequal and agreeing what the ownership split of the property is, is proving rather difficult with us both disagreeing as to what it should be.
I would suggest that each ownership percent could be worked out as simply half the 90% mortgage (ie 45%) plus the split of the deposit. If this was eg 2% and 8% then one would own 47% and the other 53% of the property.
Is anyone able to confirm if this is correct?
The reason that I ask is that my friend whom I purchased the property with contends that the mortgage is paid to the mortgage company and is therefore not on the property itself whereas the deposit was and should therefore constitute the property ownership split ie 2% and 8% become a 20% and 80% ownership split. Is this correct?
If this is the case then it appears that this friend has deceived me from the very beginning and I am going to lose a lot of money over this.
Does anyone know, maybe from previous experience, if this went to court how the mortgage will be viewed? From the very beginning I always seen the mortgage as a loan that we took out jointly to purchase the remaining 90% of the property, we have paid everything equally and therefore we both own half of that 90%.
At the moment I'm just exploring options and any help/advice regarding this would be most appreciated!
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Comments
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It sounds like your friend is trying to pull a fast one ! I bet they wouldn't see the split like that if the property had gone down in value !
This is the scenario that I would deem "Fair".
For arguments sake you bought the house for £100,000. £10,000 deposit, £90,000 mortgage.
The mortgage was in joint names and you probably both needed each other to buy the house anyway, so any increase in the property value due to the mortgage amount (ie:90%) should be split equally. So again, for arguments sake, say the house had risen in value to £200,000. This would mean 90% of £200,000 = £180,000, redeem the £90,000 mortgage which leaves £90,000 to be split 2 ways.
The way the deposit should be split is as you say. If I had "put in" £2k I would expect £4K back if the house had doubled. If I "put in" £8k then I would expect £16k.
Therefore I would entirely agree with your figures.
For anyone reading this and contemplating buying together it is very important to get a written agreement to prevent the above happening to you !
please keep us updated Boofer0 -
From a legal point of view (if it were to get to court) then I would say a judge would find in your favour.
The only way I could see the total 20/80 split thing winning (your "friends" calculations) is if the property was originally set up as "Tenants in Common" with the 20/80 split documented. The chances are that you are probably "Joint Tenants" anyway. And even if you are "Tenants in Common" I'm sure you would have noticed if the split had been anything other than 50/50.
regards0 -
I am very sure that you are correct, your friend (former friend?!) is wrong and trying to scam you badly, and would lose in court.
edit: It might be that they are just badly mistaken on how the finances work. As an example, ask them to imagine the deposit was £10, and he paid £8 (you £2), then you each paid £20,000 since then, would that still entitle them to 80% of the house?0 -
Your friend is either a cheeky boy, or stupid. However, going on the 20% 80% split of the deposit - and using some figures to demonstrate, it makes most sense to do the following:
Cost of property £100,000
2% deposit £2,000
8% deposit £8,000
House value now £200,000
Take 10% of the £200k, which is £20k
2% depositer now gets £4,000
8% depositer now gets £16,000
Pay off the mortgage of £100k
Remaining: £200-£100-£20 = £80k sitting on the table
Take £40k each
If you stick these figures into Excel, you can then come up with your own figures ... and when the house is sold and all final bills (solicitor etc) settled, the figure equating to the cash on the table is what is actually split.0 -
Thanks everyone for your replies!
I feel a lot more confident in my position now regarding this… I think the best way to approach this with my friend is to write a letter explaining everything here and try for a reconcilliation this way. I don't want this to get ugly nor lose my friendship but I also don't want to be taken for a ride !
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I think this is just a case of being able to explain things clearly enough to someone to make sense. Sometimes it's not easy by word of mouth, letter or Board.
Perhaps try looking at it from another angle. You both jointly borrowed X amount from your mortgage company. This is not fantasy money or made up money, but hard cash that was paid to the vendor. You borrowed this on a 50/50 basis and paid for 90% of the property with it ! Which is by far the lions share of the property value, which should be equally split whether the house had gone up in value or not when sold.
The 10% deposit made up the purchase price and should be split in proportion to the amount you put in + any proportional increase in property value.0 -
All your help is most appreciated. I'll let you know how it goes..!0
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I agree with you. Looking at it another way, if you only owned 20% of the house, I assume you've only been paying 20% of the mortgage payments ? I seriously doubt this and if you've been splitting the mortgage repayments erqually I would say you have at least a moral right to half the profits after the deposit money has been shared out in the correct portions.0
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Boofer_Ise wrote: »....... the mortgage is paid to the mortgage company and is therefore not on the property itself .....
Suggest to your friend (as the mortgage sounds to be continuing) that you don't pay for a few months? The reaction from your mortgage lender .... will then prove to your friend that it is very much a charge on the property - when they threaten to take it off your hands! Or, much safer, simply check online with the Land Registry - and the charge will be both visible .... and downloadable for a small fee.
Your logic on the correct apportionment is right.
Incidentally it's not clear whether you lived in the property? Bear in mind the potential CGT if you didn't - and the fact any apportionment, outside of 50:50, has a related impact on your individual liabilities.If you want to test the depth of the water .........don't use both feet !0 -
rsykes2000, you are absolutely correct all the mortgage payments have been 50:50 including all fees, and Mikeyorks, yes we are both living at the property. Thanks for pointing out the CGT situation I'll need to look further into these implications...
Leon W, unfortunately I trusted this frend and therefore did not insist upon a Deed of Trust so the split is not written down on any formal legal document. I did though at the time of purchasing the property put together a spreadsheet of all the details relating to the purchase AND included the split calculation which we both went through and agreed to, and which is now disputed by this friend. This is why I am more inclined to view this as a case of deception rather than an honest mistake (or selective memory), although perhaps this friend (I think I'll use the term friend losely from now on!) is trying to see how far they can take this to maximise their return regardless...?
I think that any fair person can see that my view of the split is the more reasonable of the two so I'm going to dig my heels in on this.
I also think that the biggest lesson of all of this is to make sure that you cover yourself legally from the beginning. As pointed out disputes such as this can be avoided with a little effort up front!0
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