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Declaration of Trust help

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  • Tom99
    Tom99 Posts: 5,371 Forumite
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    [FONT=Verdana, sans-serif]Its fairly straightforward and your example is the typical one where one partner is putting more of a deposit in and the mortgage is to be split 50/50.[/FONT]

    [FONT=Verdana, sans-serif]You need a two part formula because a straight %age split does not work.[/FONT]
    [FONT=Verdana, sans-serif]
    [/FONT][FONT=Verdana, sans-serif]Assuming £390,000K is the full price incl all fees, stamp duty etc then you have bought 13% more of the house than you partner (£54,600-£3,900)/£390,000=13%.[/FONT]
    [FONT=Verdana, sans-serif]
    [/FONT][FONT=Verdana, sans-serif]Apart from that you are splitting everything 50/50.[/FONT]
    [FONT=Verdana, sans-serif]
    [/FONT][FONT=Verdana, sans-serif]So your DOT should say that on the sale of the property the net proceeds after sale costs and redeeming the mortgage will be split as follows:[/FONT]

    [FONT=Verdana, sans-serif]You – 13% of the gross sale price less cost of sale plus 50% of the remainder[/FONT]
    [FONT=Verdana, sans-serif]
    [/FONT][FONT=Verdana, sans-serif]Partner – 50% of the remainder[/FONT]
    [FONT=Verdana, sans-serif]
    [/FONT][FONT=Verdana, sans-serif]That way, on a sale, you will get back 13% which is what your extra deposit bought and everything else is shared 50/50.[/FONT]

    [FONT=Verdana, sans-serif]This two part formula is dynamic and will reflect the increase in equity as the mortgage is paid back and house prices increase.[/FONT]
    [FONT=Verdana, sans-serif]
    [/FONT][FONT=Verdana, sans-serif]A sale on day2 would result in you partner getting very little back but by say by yr25 when the mortgage is paid off you will get 56.5% of the sale price and your partner 43.5%, thus maintaining the original 13% difference in deposit.[/FONT]

    [FONT=Verdana, sans-serif]You can't register the deeds of trust as such with the Land Reg Title but their existence can be protected on the register by way of a restriction[/FONT]
  • getmore4less
    getmore4less Posts: 46,882 Forumite
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    Mmermaid wrote: »
    Thanks all for the comments.

    Probably should give some more info -

    The reason i am asking for help is because i had thought I had worked out a fair way using percentages... but my solicitor said that it isn't a fair way to do so and they don't generally recommend using percentages in the first place. When i asked her to explain why she said she couldn't give me any legal advice but percentages are not the best route because it assumes that everything else is split in these percentages, such as improvements and the mortgage (i really dont understand how thats the case), and i would need to sign a disclaimer if i want to go down the route of percentages.

    I had worked out that I would get 56.5% and my partner 43.5% on the sale of the property. This is based on my 14% input to the deposit, his 1%, then the 85% split equally. (14+42.5 for me 1+42.5 for him)
    Is that fair or completely incorrect?

    I haven't yet got to what would need to be written in as a clause if i buy him out. I really am going round in circles with this and cant wrap my head around what is fair and what isn't and the reasons why :(


    That is correct, the key bit missing is those splits are before the mortgage is repaid, then you pay the mortgage from your shares.

    The issue is that any house costs like maintenance or repairs should be at the ownership %.

    Another strategy is to own 50:50 on ownership and split the mortgage so you each borrow what you need to to make up the numbers.

    You have a split 14% 1% 85% to make that 50% ownership each you split the mortgage(the 85% bit) 36:49 or 42.35% & 57.65%

    The other great thing with this approach is you effectively manage the mortgage as 2 separate debts( in the same account) and can easily track different overpayments.

    the interest is irrelevant what is important is the level of debt you service as that is what buys your share

    When you sell you get 50% each and pay off what is left of your share of the debt from that.


    if the OH can afford the higher payment and a 50% share of the costs that may be a good option as it avoid any issues about I own more than you.
  • Mmermaid
    Mmermaid Posts: 11 Forumite
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    Tom99 wrote: »
    [FONT=Verdana, sans-serif]Its fairly straightforward and your example is the typical one where one partner is putting more of a deposit in and the mortgage is to be split 50/50.[/FONT]

    [FONT=Verdana, sans-serif]You need a two part formula because a straight %age split does not work.[/FONT]
    [FONT=Verdana, sans-serif]
    [/FONT][FONT=Verdana, sans-serif]Assuming £390,000K is the full price incl all fees, stamp duty etc then you have bought 13% more of the house than you partner (£54,600-£3,900)/£390,000=13%.[/FONT]
    [FONT=Verdana, sans-serif]
    [/FONT][FONT=Verdana, sans-serif]Apart from that you are splitting everything 50/50.[/FONT]
    [FONT=Verdana, sans-serif]
    [/FONT][FONT=Verdana, sans-serif]So your DOT should say that on the sale of the property the net proceeds after sale costs and redeeming the mortgage will be split as follows:[/FONT]

    [FONT=Verdana, sans-serif]You – 13% of the gross sale price less cost of sale plus 50% of the remainder[/FONT]
    [FONT=Verdana, sans-serif]
    [/FONT][FONT=Verdana, sans-serif]Partner – 50% of the remainder[/FONT]
    [FONT=Verdana, sans-serif]
    [/FONT][FONT=Verdana, sans-serif]That way, on a sale, you will get back 13% which is what your extra deposit bought and everything else is shared 50/50.[/FONT]

    [FONT=Verdana, sans-serif]This two part formula is dynamic and will reflect the increase in equity as the mortgage is paid back and house prices increase.[/FONT]
    [FONT=Verdana, sans-serif]
    [/FONT][FONT=Verdana, sans-serif]A sale on day2 would result in you partner getting very little back but by say by yr25 when the mortgage is paid off you will get 56.5% of the sale price and your partner 43.5%, thus maintaining the original 13% difference in deposit.[/FONT]

    [FONT=Verdana, sans-serif]You can't register the deeds of trust as such with the Land Reg Title but their existence can be protected on the register by way of a restriction[/FONT]

    Thanks for explaining it this way Tom that actually makes a lot of sense doing it this way.
    Can i ask, as my solicitor so kindly wont advise me :rotfl: if I wanted to write into the Deed a clause regarding one party buying out the others share... would it follow the same conditions? What would I need to do to buy out my partners share? That part is confusing me too.

    The area we are buying in is my area which is closer to my friends and family, and should we split, it would be me who would want to buy him out and keep it. What do I need to think about in this scenario?

    Thanks for all the help
  • Tom99
    Tom99 Posts: 5,371 Forumite
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    Mmermaid wrote: »
    Thanks for explaining it this way Tom that actually makes a lot of sense doing it this way.
    Can i ask, as my solicitor so kindly wont advise me :rotfl: if I wanted to write into the Deed a clause regarding one party buying out the others share... would it follow the same conditions? What would I need to do to buy out my partners share? That part is confusing me too.
    The area we are buying in is my area which is closer to my friends and family, and should we split, it would be me who would want to buy him out and keep it. What do I need to think about in this scenario?
    Thanks for all the help


    [FONT=Verdana, sans-serif]I think you would use exactly the same sort of formula to establish the price one party would pay to buy out the other.[/FONT]
    [FONT=Verdana, sans-serif]However I am not sure how you would deal with the following, on which you would need your solicitors advice:[/FONT]
    • [FONT=Verdana, sans-serif]Since you will not be selling in the open market you will need to agree on the open market value. What if you can't agree, how is a value decided? Would it be agreed that you appoint an independent expert for example and who is to pay their fee.[/FONT]
    • [FONT=Verdana, sans-serif]Can one party (you?) force the other party to sell their share if they do not want to sell?[/FONT]
    • [FONT=Verdana, sans-serif]There will be costs involved in the transfer, who is to pay these?[/FONT]
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