Declaration of Trust - Negative Equity clause

jonh901

Our case is as follows:

Myself and my Girlfriend are buying our First Home. We would like some advice on how it would be best to draft a Declaration of Trust, and what Negative Equity Provisions to include, based on the following circumstances:

·         Purchase Price = £518,000

·         I’m (John) putting down the entire deposit = £95,000

·         She’s (Jane) paying the legal/buying fees (solicitors, broker, survey, stamp duty etc.) = £7,000

·         Mortgage and everything else (Bills, Renovations, Improvements, Repairs etc.) are to be split = 50/50

In DOT, we currently have included the following:

“After payment of any outstanding mortgage, legal, seller fees and taxes, the net proceeds of any sale to be apportioned as follows:

- The initial £95,000, goes to John

- The remainder to be divided equally

- All shares to be held as Tenants in Common”

 

My question is, how should we draft the Negative Equity Provisions clause based on the above and is there anything else that is important to be included in DOT?

Many thanks in advance

jonnydeppiwish!

Best asking your solicitor as they will have done this before 👍 

_Penny_Dreadful

Why is John's contribution 100% deposit with no contribution to legal/buying fees and Jane's contribution 0% deposit and the only one contributing to the legal/buying fees.  Sounds like Jane is being ripped off and will be even more so ripped off in the even of negative equity as John demands his full 95,000 back.  I hope she is taking her own independent legal advice.

jonh901

_Penny_Dreadful said:

Why is John's contribution 100% deposit with no contribution to legal/buying fees and Jane's contribution 0% deposit and the only one contributing to the legal/buying fees.  Sounds like Jane is being ripped off and will be even more so ripped off in the even of negative equity as John demands his full 95,000 back.  I hope she is taking her own independent legal advice.

That's just how we decided to approach this. I cover deposit, she covers legal/buying fees. I'm guessing you're suggesting that we should split the legal/buying fees equally (3,500 each) and then use Her remaining 3,500 as Deposit?

SusieT

If you are worried about negative equity, why not have John gets the first 18.34%   Jane gets the first 1.3% and the remainder is divided equally?

jonh901

Tbh, I'm not really worried about negative equity that much, just want to make sure that unequal contributions are protected and its fair for both parties. We'll have to ask the solicitors, but just wanted some advice from ppl who have does this before

_Penny_Dreadful

jonh901 said:

_Penny_Dreadful said:

Why is John's contribution 100% deposit with no contribution to legal/buying fees and Jane's contribution 0% deposit and the only one contributing to the legal/buying fees.  Sounds like Jane is being ripped off and will be even more so ripped off in the even of negative equity as John demands his full 95,000 back.  I hope she is taking her own independent legal advice.

That's just how we decided to approach this. I cover deposit, she covers legal/buying fees. I'm guessing you're suggesting that we should split the legal/buying fees equally (3,500 each) and then use Her remaining 3,500 as Deposit?

Buying and legal fees should be split. Then when the property is sold and the mortgage repaid whatever equity is left 17.66% goes to John, 0.68% goes to Jane and the rest is split 50/50. 

silvercar

_Penny_Dreadful said:

jonh901 said:

_Penny_Dreadful said:

Why is John's contribution 100% deposit with no contribution to legal/buying fees and Jane's contribution 0% deposit and the only one contributing to the legal/buying fees.  Sounds like Jane is being ripped off and will be even more so ripped off in the even of negative equity as John demands his full 95,000 back.  I hope she is taking her own independent legal advice.

That's just how we decided to approach this. I cover deposit, she covers legal/buying fees. I'm guessing you're suggesting that we should split the legal/buying fees equally (3,500 each) and then use Her remaining 3,500 as Deposit?

Buying and legal fees should be split. Then when the property is sold and the mortgage repaid whatever equity is left 17.66% goes to John, 0.68% goes to Jane and the rest is split 50/50. 

A agree, though simpler to say the remaining 58.49 to John and 41.51 to Jane. 

Though there is an argument that you both wouldn’t have been able to buy this property without both your names on the mortgage, so after repaying deposits, the remainder should be split 50/50.

SprostonGreenHead

If the remainder of any equity after accounting for deposits is to be split equally, then it would imo make sense for any debt after accounting for deposits (negative equity) to be split equally.

housebuyer143

silvercar said:

_Penny_Dreadful said:

jonh901 said:

_Penny_Dreadful said:

Why is John's contribution 100% deposit with no contribution to legal/buying fees and Jane's contribution 0% deposit and the only one contributing to the legal/buying fees.  Sounds like Jane is being ripped off and will be even more so ripped off in the even of negative equity as John demands his full 95,000 back.  I hope she is taking her own independent legal advice.

That's just how we decided to approach this. I cover deposit, she covers legal/buying fees. I'm guessing you're suggesting that we should split the legal/buying fees equally (3,500 each) and then use Her remaining 3,500 as Deposit?

Buying and legal fees should be split. Then when the property is sold and the mortgage repaid whatever equity is left 17.66% goes to John, 0.68% goes to Jane and the rest is split 50/50. 

A agree, though simpler to say the remaining 58.49 to John and 41.51 to Jane. 

Though there is an argument that you both wouldn’t have been able to buy this property without both your names on the mortgage, so after repaying deposits, the remainder should be split 50/50.

But you could look at it as if John only gets his 95k back in say 10 years, that 95k has deprecated massively. If they split it as a percentage as per the deposits and then split the remaining equity 50/50 that would be better?