Tenants in Common but with unequal % ownership

vacheron

Bookworm105 said:

why do you think it is unfair that the person paying more towards the mortgage should not own a greater share of the property? If 60/40 reflects the current contribution then TIC 60/40 it is.

The relative ownership share can always be amended again in the future via a new declaration/deed of trust if the relative income position changes 

Because they will both be putting in matched £60K deposits. So in the first few months, they should own 50:50, and this ratio would only change very slightly over the first few months / years, especially as the early mortgage repayments will consist primarily of interest repayment with a relatively small amount going towards the capital.

saajan_12

RoystonV said:

My daughter (FTB) and her boyfriend (non-FTB) are looking to buy their first house together with a joint mortgage. 

Have they addressed the more fundamental question about buying a house and co-mingling funds if they aren't at the first 'life milestone' that cements their relationship? Buying a house and being on a joint mortgage has a bigger impact in terms of credit histories, ability to force a sale to move on than even marriage where a divorce can be relatively easier. Can one of them buy and the other contribute to interest / bills only while building a side investment, ready to pool when they are actually ready?  

RoystonV said:

In respect of a deposit on the new property, he plans to use the equity on the sale of his flat (c.£60k) and my daughter will match this through a combination of personal savings and a gift from myself i.e. they will both be contributing equally to funding the purchase deposit and all fees, including the £10,000 stamp duty for which, ironically, only he is liable.
...
Whilst they are happy to commit to being 'tenants in common', he wants ownership to be split 60/40 in his favour since, as the higher earner, he will be paying a greater proportion of the mortgage, 

Re the split, how much of the purchase price is the mortgage v deposit? How would the mortgage be split and will this be agreed in writing just as firm as the 60/40? That would help to see if 60/40 is indeed equitable, given there's a sizable deposit that's 50/50. Also things can change, what if he starts contributing less but the ownership is still fixed?

RoystonV said:

What disadvantages might such an uneven split arrangement create for my daughter and am I right to be overly concerned about his approach here?

RoystonV said:
am I right in thinking that his 'majority' ownership (however slight) would also suppress her rights overall, particularly in terms of selling the property at a later date?

Not many.. whether 50/50 or 60/40, if they broke up they'd need to either sell or one buy the other out. Having over 50% doesn't give a controlling vote. Both sides should cooperate but if they didn't then it'd be a case of forcing a sale via courts and all the costs that entails. That doesn't change with the % being slightly different. 

housebuyer143

vacheron said:

Bookworm105 said:

why do you think it is unfair that the person paying more towards the mortgage should not own a greater share of the property? If 60/40 reflects the current contribution then TIC 60/40 it is.

The relative ownership share can always be amended again in the future via a new declaration/deed of trust if the relative income position changes 

Because they will both be putting in matched £60K deposits. So in the first few months, they should own 50:50, and this ratio would only change very slightly over the first few months / years, especially as the early mortgage repayments will consist primarily of interest repayment with a relatively small amount going towards the capital.

Ok I see that. Why don't they stipulate then that both are to get back 60k each and then the equity is split 60/40? That resolves that?

RoystonV

our_des said:

He's protecting himself and she's not bringing the same, you are topping her up to meet his portion. Look at it as if you were his parent(s), would you have the same thought?

None of us have a crystal ball to see what's going to happen in the future, they could well live a long and happy life together or 5 years down the line they may drift apart

Thanks our_des,

On that basis, assuming they do 'live a long and happy life together' and are blessed with children, would she need to return to work - regardless of their financial situation - simply to avoid her % ownership dwindling even further??

RoystonV

saajan_12 said

Re the split, how much of the purchase price is the mortgage v deposit? How would the mortgage be split and will this be agreed in writing just as firm as the 60/40? That would help to see if 60/40 is indeed equitable, given there's a sizable deposit that's 50/50. Also things can change, what if he starts contributing less but the ownership is still fixed?

The mortgage is 85% of purchase price and there is currently nothing in writing stating their relative monthly mortgage contributions. 

housebuyer143

RoystonV said:

our_des said:

He's protecting himself and she's not bringing the same, you are topping her up to meet his portion. Look at it as if you were his parent(s), would you have the same thought?

None of us have a crystal ball to see what's going to happen in the future, they could well live a long and happy life together or 5 years down the line they may drift apart

Thanks our_des,

On that basis, assuming they do 'live a long and happy life together' and are blessed with children, would she need to return to work - regardless of their financial situation - simply to avoid her % ownership dwindling even further??

You already said they will split it 50/50 in the future if they have kids/marry?
I think it's fair for him to want to protect himself if he's paying more when their relationship isn't that far down the line.

Bookworm105

vacheron said:

Bookworm105 said:

why do you think it is unfair that the person paying more towards the mortgage should not own a greater share of the property? If 60/40 reflects the current contribution then TIC 60/40 it is.

The relative ownership share can always be amended again in the future via a new declaration/deed of trust if the relative income position changes 

Because they will both be putting in matched £60K deposits. So in the first few months, they should own 50:50, and this ratio would only change very slightly over the first few months / years, especially as the early mortgage repayments will consist primarily of interest repayment with a relatively small amount going towards the capital.

as i said, if 60/40 reflects current contribution...
as others point out, it would be common to treat the original deposits as cash amounts rather than equity shares, so each gets back their cash and then the profit (loss) from growth (or decrease) in value is based purely on respective shares built up by the unequal contributions

once they are married the divorce will start at 50/50 whatever their respective positions are anyway  

RoystonV

housebuyer143 said

Thanks our_des,

On that basis, assuming they do 'live a long and happy life together' and are blessed with children, would she need to return to work - regardless of their financial situation - simply to avoid her % ownership dwindling even further??

You already said they will split it 50/50 in the future if they have kids/marry?
I think it's fair for him to want to protect himself if he's paying more when their relationship isn't that far down the line.

To be clear, it was his suggestion (not hers) that the split be revisited later down the line and although they've been living together for 2 years and he has admitted he couldn't afford to move without her financial support, she's starting to think he may be using the situation to his advantage.

The fact the 40% vs 50% TIC changes little (aside from the future equity values) will be of some consolation.

D123456789

Has she been living at his place the last 2 years? Has she contributed to the mortgage? How have they worked out what is fair in their current living situation? 

housebuyer143

RoystonV said:

housebuyer143 said

Thanks our_des,

On that basis, assuming they do 'live a long and happy life together' and are blessed with children, would she need to return to work - regardless of their financial situation - simply to avoid her % ownership dwindling even further??

You already said they will split it 50/50 in the future if they have kids/marry?
I think it's fair for him to want to protect himself if he's paying more when their relationship isn't that far down the line.

To be clear, it was his suggestion (not hers) that the split be revisited later down the line and although they've been living together for 2 years and he has admitted he couldn't afford to move without her financial support, she's starting to think he may be using the situation to his advantage.

The fact the 40% vs 50% TIC changes little (aside from the future equity values) will be of some consolation.

Honestly the situation you describe is exactly how my husband and I started, as he paid more and I less. We have been married 12 years now and have a kid so that's completely out the window and we pool our money and just pay the bills now, and we have an equal share. He isn't likely to benefit much from the arrangement unless they plan to never start a family or leave it 10+ years. 

Do make sure it's stated though that they get their cash deposit sums back firstly and then equity split.