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Buying out my ex - disagreeing over Declaration of Trust

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  • ThrugelmirThrugelmir Forumite
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    We just provided the relative contribution figures to the solicitor who drafted the DoT, all wording was done by them. I didn't realise it needed to be checked separately, now I know...

    Solicitor will draft what you ask them to. The reason for one party seeking separate advice is that the DOT is legally binding. The contents and implication of the wording needs to be fully understood. . A solicitor can only advise one party otherwise there'll be a conflict of interest.
    “Markets have been so good for so long, that many investors are trivialising the advanatages of actively managing portfolio risk" - Gervais Williams
  • edited 17 September 2019 at 4:06PM
    ExodiExodi Forumite
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    edited 17 September 2019 at 4:06PM
    Hi Exodi - thanks for sharing your DoT clauses. That's actually almost exactly how our percentage shares are calculated! It's the initial contribution + expenditure (including share of mortgage) / total that gave those percentages. That gives him 43% and me 57%. The problem for me is actually in how that percentage share is then implemented, whether it's before mortgage remaining or after, or if it applies to equity. As I have discovered, the only way that percentage works to return my initial deposit + proportionate shares, is before mortgage, otherwise he gets a disproportionately greater share far beyond his contribution. How does yours define this?

    It states 'its net proceeds of sale and its net rents and profits' in the below quote. The fact it refers to 'net proceeds' and 'profits' would indicate it's referring to the equity after mortgage is discharged.

    EDIT: after re-reading your reply to clarify - the calculation will work out what we've put into the house (initial deposit + respective mortgage payments) and then work that out as a percentage to split the equity. This would be the fairest way to do this, if there is a shortfall, it would be absorbed proportionately by both parties.

    If I'm understanding you correctly, the issue is you feel your full deposit should be returned and then your total other contributions should be split - I personally don't think is fair on him; you would benefit from any increases in value by having a higher stake in the house, why should you not lose out from decreases in the same way. Please correct me if I've misinterpreted your intentions.
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  • Right, the solicitor did not give either of us legal advice. She created something herself based on a table of relative contributions we gave her, and told us it was the correct way to do the calculations! Now I realise I should have got advice. And actually, in my research, DoT's can be challenged or set aside based on mistake, fraud or misrepresentation, and there are cases where this was done.

    Exodi - yes I understand now that your percentages are set according to the mortgage repayments so would change to reflect any particular point in time. That's much better and I wish we had done that, as then the wording is irrelevant.

    However, I am not trying to get my full deposit back even if the house decreases in value. This is not my issue with the DoT at all. My issue is that I've the current wording, in ANY scenario except having paid off the whole mortgage, he gets far more than he put in, which effectively comes out of my deposit if the shares apply to equity or to profit after mortgage.
    Here's approximate figures (exact ones are above as I've done this before):
    As of today
    I've contributed £47,000+£10,000+£3,500+£12,500 = £73,000.
    He's contributed £10,000+£3,500+£12,500 = £26,000.
    The house has gone up in value by £40,000, so the equity is now £112,000 (including my £47000 deposit and our mortgage payments to date).
    If he gets 43% of £112,000 then he gets £48,000 and I get £64,000.
    That's not absorbing any decrease in value as a win some lose some risk, that's simply losing money on a house that has increased in value, because I'm giving him a fairly large chunk of my investment to date! He's profiting by £22,000 whereas I'm making a loss. The DoT wording simply does not express the intention behind the figures included in it. But it seems I have to go to court to challenge it, or accept the loss, pending legal advice.
  • ExodiExodi Forumite
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    ...

    That's not absorbing any decrease in value as a win some lose some risk, that's simply losing money on a house that has increased in value, because I'm giving him a fairly large chunk of my investment to date! He's profiting by £22,000 whereas I'm making a loss. The DoT wording simply does not express the intention behind the figures included in it. But it seems I have to go to court to challenge it, or accept the loss, pending legal advice.

    My apologies, in truth I hadn't read the whole thread. I'll have a thorough read tonight, but if it is as you say, I'd expect any judge would appreciate the intention.
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  • edited 17 September 2019 at 6:20PM
    ThrugelmirThrugelmir Forumite
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    edited 17 September 2019 at 6:20PM
    But it seems I have to go to court to challenge it, or accept the loss, pending legal advice.

    Is your ex open to negotiation? As court would be very costly (for both of you).

    Seems easiest way out is for you to receive the £47k deposit back then the remainder of the net equity to be split 50/50.

    Hopefully common sense will prevail.
    “Markets have been so good for so long, that many investors are trivialising the advanatages of actively managing portfolio risk" - Gervais Williams
  • Tom99Tom99 Forumite
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    Right, the solicitor did not give either of us legal advice. She created something herself based on a table of relative contributions we gave her, and told us it was the correct way to do the calculations!
    Do you have anything in writing to support the fact that it was the solicitor who suggested this straight percentage split of the net proceeds which is obviously not the correct way?
    The DoT wording simply does not express the intention behind the figures included in it. But it seems I have to go to court to challenge it, or accept the loss, pending legal advice.
    Correct. It only works when the mortgage is paid off.
    Given the sums involved if an agreement cannot be reached with your ex then legal advice on whether you have any claim for negligence against the solicitor or any claim to rectify the DOT may be worthwhile.
  • getmore4lessgetmore4less Forumite
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    Exodi wrote: »
    The wording of your DoT is bizarre if it features predefined percentages? I have a DoT with my partner (a very similar arrangement perchance) and ours is worded as follows;

    2.1 The First Owner and the Second Owner declare that they hold the Property, its net proceeds of sale and its net rents and profits on trust for themselves as tenants in common in the percentage shares specified in:
    2.1.1 Clause 3 for the First Owner; and
    2.1.2 Clause 4 for the Second Owner.
    3. FIRST OWNER'S SHARE
    3.1 The First Owner's percentage share shall be calculated by dividing the total of:
    3.1.1 the First Owner's Initial Contribution; and
    3.1.2 all sums paid by the First Owner in respect of the Expenditure,
    3.2 by the Total Expenditure and then multiplying the result by 100.
    4. SECOND OWNER'S SHARE
    4.1 The Second Owner's percentage share shall be calculated by dividing the total of:
    4.1.1 the Second Owner's Initial Contribution; and
    4.1.2 all sums paid by the Second Owner in respect of the Expenditure,
    4.2 by the Total Expenditure and then multiplying the result by 100.

    That way, the amount returned reflects the initial deposits. It's almost criminal to assign a flat percentage like your solicitor has...

    What are you including in the Expenditure calculation?

    If it is mortgage payment then the this DOT is also flawed just differently.

    It also takes no account of the timings of the money going in.

    On a £200k house that is worth £400k in the future

    using your DOT £10k at the start buys the same % as £10k at the end

    £10k at the end should buy 1/2 what £10k at the start did
  • getmore4lessgetmore4less Forumite
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    Note to anyone setting up a DOD

    Make sure it works for examples by working through some simple ones and test the edge cases

    Take Exodi DOT and how that works when the expenses include the mortgage.

    say A&B bought a house With A putting 1/3 down as a deposit and 2/3 on a mortgage paid equally 1/3 each

    obviously once paid off the shares are A=2/3 B=1/3 (66.67% 33.33%)

    using the DOT where it is all expenditure and the mortgage was 5% over 25 years

    The payments would come 1.75 x the initial 2/3 that was on the mortgage

    That makes the shares 61% and 39% as that initial 1/3 has devalued.
  • Tom99Tom99 Forumite
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    Note to anyone setting up a DOD
    Make sure it works for examples by working through some simple ones and test the edge cases
    Good advice. For starters look at what would happen if a sale took place on day 2.
  • ExodiExodi Forumite
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    £10k at the end should buy 1/2 what £10k at the start did

    I remember discussing the premises for the DoT with the solicitor in quite some depth. They had repeatedly asked throughout that it wasn't too complicated as you need someone to clearly interpret it as intended further down the line.

    If I've understood your post correctly, I think attempting to have pages and pages of calculations that express the inflation co-efficient at any given time is not pragmatic and begging for misinterpretation down the line.

    Generally, people are quite happy to 'invest' money in bricks and mortar as it's historically given them a good return of which is already technically linked to inflation. I think rewarding someone that put in a higher deposit with the lions share of increases in house value AND making it so their money has also, in effect, double dipped and been stored in a good savings account is a bit over the top.
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