Opinions on Joint Tenancy vs Tenants in Common, Declaration of Trust etc

SprostonGreenHead

So I'm in the process of buying a property with my partner and we are pondering the Joint Ownership vs Tenants in Common question. We are unmarried but have lived together for years and have two baby kids (twins!).

We're purchasing at 75% LTV. I have had a job historically which pays better than my partner and I had some inheritance cash. She no longer works as she looks after the kids. I will be putting up 80% of the deposit and I'll be paying 100% of the mortgage (as sole earner).

Our ideal situation is that we would purchase the property with Joint Ownership *but* in the event of a break-up and sale, we would each get back our deposit contribution before any accrued equity gain or loss would be applied evenly. Although my partner won't be putting up the same deposit contribution and won't be earning money for mortgage payments, I think she should be entitled to 50% of anything we gain whilst living there, but we still ideally want to own the property jointly. Looking after the kids is a full time job she's not being paid for, and if she were working, her salary would barely cover the childcare.

Initially, when we were asked the question, our solicitor suggested we could sign a Declaration of Trust. A few months on when it comes to sign this document, the solicitor informs me this will mean we will own the property as tenants in common with uneven shares. This really isn't what we want.

How do we achieve Joint Ownership whilst also having a formal financial agreement that would be activated only in the event of a breakup? If we sell the house together (as in to buy another house), I don't want it to be split it "shares", equal or unequal, but we both feel it's fair that I as the large deposit contributor, would get my deposit back first if we were to go our separate ways. What's the best way to do this beyond a verbal contract?

Keep_pedalling

I don’t think what you are asking for is possible, and it also seems unfair that your partner should suffer a financial penalty for taking time out to raise your children.

Have you also though of what would happen if you go down the TIC route if one of you died. If you have not and neither of you have wills the survivor is going to be left in a right financial mess. 

SprostonGreenHead

Keep_pedalling said:

I don’t think what you are asking for is possible, and it also seems unfair that your partner should suffer a financial penalty for taking time out to raise your children.

Have you also though of what would happen if you go down the TIC route if one of you died. If you have not and neither of you have wills the survivor is going to be left in a right financial mess. 

In what sense do you calculate a "financial penalty for taking time out to raise your children"? Her immediate stake in the property will be equal to her deposit contribution and any extra stake in the property beyond that will be equal to mine. Imagine the alternative, albeit unlikely, that if we share 50/50 from the outset and 1yr in we break up and the property is worth the same. The 80% of deposit money I contributed is now 50% of the initial deposit and her 20% is now 50%. TBH I wasn't looking to debate the ethics on this because it's something I agreed with her and we both felt it is fair.

Edit: For clarity, the children are 5 months old, and my partner stopped working 5 months ago (albeit with some maternity pay). Her ability to provide a greater share of the deposit has not been hampered by that in a material way. We've been in the purchase process for 3 of those 5 months.

Yes, I'm aware that we would need wills for TIC and if we do go that route we will both sign wills leaving whatever stake we had in the house to each other.

donutandbeer

Basically the way you want to divide your shares is:
Deposit - 80/20
Mortgage - 50/50 (even though at the moment you will be paying 100%)

I have a family member who recently purchased a property with his partner like this. He provided the cash deposit (about 60% of house price), and his partner pays all the mortgage. I believe they hold the title as tenants in common and have signed a declaration of trust. I also know that they plan to adjust the declaration of trust further down the line with more mortgage paid and if he starts to contribute to the mortgage. So unfortunately I don’t know the details of how they divide their shares, but I believe this is something that your solicitor should be able to advise on, as long as you make your wish clear (that you want to divide the deposit as 80/20 but any mortgage paid would be 50/50 share).

housebuyer143

What you are asking for doesn't really exist. As a married couple with children, if you came to divorce, you're going to find all your assets would be looked at and split accordingly, even pensions.
It wouldn't really matter if you had an 80/20 split or a declaration of trust, which means she would not be penalised for taking time out to raise the children. I understand you want to protect your share all the deposit but unfortunately that's what becoming married add specially having children does to you financially.


I would always do tenants in common and is exactly what I have done with my husband but we have 50/50 split. 
In your case, I don't think it particularly matters if you do joint tenants or tenants in common.

saajan_12

SprostonGreenHead said:

So I'm in the process of buying a property with my partner and we are pondering the Joint Ownership vs Tenants in Common question. We are unmarried but have lived together for years and have two baby kids (twins!).

We're purchasing at 75% LTV. I have had a job historically which pays better than my partner and I had some inheritance cash. She no longer works as she looks after the kids. I will be putting up 80% of the deposit and I'll be paying 100% of the mortgage (as sole earner).

Our ideal situation is that we would purchase the property with Joint Ownership *but* in the event of a break-up and sale, we would each get back our deposit contribution before any accrued equity gain or loss would be applied evenly. Although my partner won't be putting up the same deposit contribution and won't be earning money for mortgage payments, I think she should be entitled to 50% of anything we gain whilst living there, but we still ideally want to own the property jointly. Looking after the kids is a full time job she's not being paid for, and if she were working, her salary would barely cover the childcare.

Initially, when we were asked the question, our solicitor suggested we could sign a Declaration of Trust. A few months on when it comes to sign this document, the solicitor informs me this will mean we will own the property as tenants in common with uneven shares. This really isn't what we want.

How do we achieve Joint Ownership whilst also having a formal financial agreement that would be activated only in the event of a breakup? If we sell the house together (as in to buy another house), I don't want it to be split it "shares", equal or unequal, but we both feel it's fair that I as the large deposit contributor, would get my deposit back first if we were to go our separate ways. What's the best way to do this beyond a verbal contract?

I think what you want is indeed Tenants In Common..
If you stay together, then the shares are irrelevant and would all be lumped back together into a new house or whatever you do next. If you break up, then the shares actually go into your separate pockets and you go your separate ways. 
Beyond that, Tenants in Common is just a piece of paper. You both have beneficial ownership of the property. 

Annisele

SprostonGreenHead said:

Initially, when we were asked the question, our solicitor suggested we could sign a Declaration of Trust. A few months on when it comes to sign this document, the solicitor informs me this will mean we will own the property as tenants in common with uneven shares. This really isn't what we want.

I don't really follow why not - what's the problem with owning unequal shares?

It sounds as though you only want the unequal thing to kick in if you split up. That's the time when you really need a documented agreement, because you can't guarantee that anybody is going to play nicely anymore.

If you don't split up, it doesn't really matter what your agreement says (unless you're rich enough for transfers between you to potentially cause tax problems). If you're still together, and you're making joint financial decisions with your joint money, then whose name it's in is (probably) beside the point.

(If I was your partner, I'd have a considerable problem with the whole arrangement - that problem being that if we did split up, it sounds as though I'd be entitled to much less as your ex partner than as your ex spouse, despite having given up my earning potential to raise our joint children. But that's not what you asked about!)

Another thing you didn't ask about, but which I can comment on without sounding quite so judgemental, is the will situation. You said you'd get wills if you go the TiC route - but please thing about doing that anyway, asap. You're part of an unmarried couple with children,and you clearly do have some assets (the saved deposits at the very least). If one of you dies without a will, you might land the other with being trustee of money held for the benefit of your children, and that can be horribly messy for the survivor.

deano2099

A Tenants in Common agreement can essentially say whatever you want as long as you both agree to it. So a solicitor could draft something that said in legal terms: "Joint Ownership *but* in the event of a break-up and sale, we would each get back our deposit contribution before any accrued equity gain or loss would be applied evenly"- but it's still going to be a TiC agreement. 

For practical purposes that's what you want, if you're just generally uncomfortable with the idea of a TiC agreement in principle then there's no real option.