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tryingtobemoresavvy
Posts: 9 Forumite
Hello, I am a first-time poster, but I have been a long-time reader of the advice in these forums. I hope this is the right place to post this to get some help!
Four years ago I bought a house with my partner for £310,000. I contributed all of the deposit, and we agreed to split other costs and the mortgage. We had a Declaration of Trust drawn up to protect our interests, or so I thought, recording all the costs associated with the sale and promised to improvements and the mortgage, to ensure a fair allocation of shares.
Here is the breakdown as recorded in the Declaration of Trust (~ indicates small roundings of the figures):
Me: £47,000 deposit, ~£3500 fees, £10,000 to improvements, half of the £263,000 mortgage.
Him: ~£3,500, £10,000 to improvements, half of the £263,000 mortgage.
The Declaration of Trust records our shares as 43.05% to him, 56.95% to me.
As of this month, we have paid off ~£25,220 of the mortgage, with ~£237,780 remaining. We did split all the improvements, mortgage and bills 50:50 as recorded in the Declaration of Trust.
We are also going through some party wall issues with the neighbours who are planning works (this is in hand with surveyors but is the worst timing in the world) so I do not believe we can sell until this is resolved (it’s also likely to cost us a contribution to strengthen the proposed works). I don’t know how long this will be but living together is terrible. He wants me to buy him out immediately, he does not want to wait for a sale, although I plan to sell the house as soon as the party wall works are concluded (I don’t want to remain here).
He claims that he is entitled to 43% of the equity, according to the Declaration of Trust and that is what I need to pay him to buy him out. He agrees the figures are all correct, but that the wording is mistaken and actually benefits him preferentially, which he insists on following. On a valuation of £350,000 (based on a single estate agent he had round and hasn't provided proof for) and 43%, he is claiming £48,000 of the equity (which totals ~£112,000). His brother is a lawyer and has advised this, as well as being the one to respond to emails that I have written him explaining the calculations.
As I understand it, the equity comprises the increase in value (£40,000), the mortgage repaid (£25,220), and my deposit (£47,000). I cannot understand how he can be entitled to £48,000 when the majority of the equity is my deposit.
I believed the Declaration of Trust splits the shares as ownership, and so we should calculate our ownership value and deduct the respective share of debt owed on the mortgage, his share thus being ~£31,000. He disagrees, as this would give him less. He did say that might have been the intent, but it was worded wrong and so he wants to follow the wording. He says the Declaration should have said my deposit was taken out first and it doesn’t, so I lose out.
He thinks I’ll get a big windfall when I sell next year, but I pointed out that after all the costs (party wall and his share plus all my contributions to date), I would actually lose money, so he said I should keep the house for ten years and sell then!
The Declaration of Trust does not state whether these shares apply to ownership or equity. I have gone back to the solicitors who drew up the Declaration, and they have stated the figures are correct, but have not yet responded regarding the wording, nor whether the shares apply to ownership or equity. He said I shouldn’t waste money on legal advice (which he’s getting for free from his brother), I should just pay him so he can move out tomorrow, and that any court would follow the wording of the Declaration and not care about the stated relative contributions or the intent, so I would lose and have to pay his costs as well. He said I could pursue a claim for the difference against the solicitor who drew up the Declaration.
While I am waiting to hear back from the solicitors, it is horrible here and I don’t know what to do. I can afford to take on the remaining mortgage (I have been speaking to the mortgage broker who arranged our mortgage), but I cannot afford to pay him what he wants as well as whatever may be required for the party wall, and I am upset at the prospect of losing quite a lot of the deposit I put in so he can profit from it. He flatly disagrees with my interpretation and insists on his, so we have reached an impasse. He has said if we don’t agree and sort it out, terrible things will happen (but hasn’t said what those are). Please, does anyone have any advice?
Four years ago I bought a house with my partner for £310,000. I contributed all of the deposit, and we agreed to split other costs and the mortgage. We had a Declaration of Trust drawn up to protect our interests, or so I thought, recording all the costs associated with the sale and promised to improvements and the mortgage, to ensure a fair allocation of shares.
Here is the breakdown as recorded in the Declaration of Trust (~ indicates small roundings of the figures):
Me: £47,000 deposit, ~£3500 fees, £10,000 to improvements, half of the £263,000 mortgage.
Him: ~£3,500, £10,000 to improvements, half of the £263,000 mortgage.
The Declaration of Trust records our shares as 43.05% to him, 56.95% to me.
As of this month, we have paid off ~£25,220 of the mortgage, with ~£237,780 remaining. We did split all the improvements, mortgage and bills 50:50 as recorded in the Declaration of Trust.
We are also going through some party wall issues with the neighbours who are planning works (this is in hand with surveyors but is the worst timing in the world) so I do not believe we can sell until this is resolved (it’s also likely to cost us a contribution to strengthen the proposed works). I don’t know how long this will be but living together is terrible. He wants me to buy him out immediately, he does not want to wait for a sale, although I plan to sell the house as soon as the party wall works are concluded (I don’t want to remain here).
He claims that he is entitled to 43% of the equity, according to the Declaration of Trust and that is what I need to pay him to buy him out. He agrees the figures are all correct, but that the wording is mistaken and actually benefits him preferentially, which he insists on following. On a valuation of £350,000 (based on a single estate agent he had round and hasn't provided proof for) and 43%, he is claiming £48,000 of the equity (which totals ~£112,000). His brother is a lawyer and has advised this, as well as being the one to respond to emails that I have written him explaining the calculations.
As I understand it, the equity comprises the increase in value (£40,000), the mortgage repaid (£25,220), and my deposit (£47,000). I cannot understand how he can be entitled to £48,000 when the majority of the equity is my deposit.
I believed the Declaration of Trust splits the shares as ownership, and so we should calculate our ownership value and deduct the respective share of debt owed on the mortgage, his share thus being ~£31,000. He disagrees, as this would give him less. He did say that might have been the intent, but it was worded wrong and so he wants to follow the wording. He says the Declaration should have said my deposit was taken out first and it doesn’t, so I lose out.
He thinks I’ll get a big windfall when I sell next year, but I pointed out that after all the costs (party wall and his share plus all my contributions to date), I would actually lose money, so he said I should keep the house for ten years and sell then!
The Declaration of Trust does not state whether these shares apply to ownership or equity. I have gone back to the solicitors who drew up the Declaration, and they have stated the figures are correct, but have not yet responded regarding the wording, nor whether the shares apply to ownership or equity. He said I shouldn’t waste money on legal advice (which he’s getting for free from his brother), I should just pay him so he can move out tomorrow, and that any court would follow the wording of the Declaration and not care about the stated relative contributions or the intent, so I would lose and have to pay his costs as well. He said I could pursue a claim for the difference against the solicitor who drew up the Declaration.
While I am waiting to hear back from the solicitors, it is horrible here and I don’t know what to do. I can afford to take on the remaining mortgage (I have been speaking to the mortgage broker who arranged our mortgage), but I cannot afford to pay him what he wants as well as whatever may be required for the party wall, and I am upset at the prospect of losing quite a lot of the deposit I put in so he can profit from it. He flatly disagrees with my interpretation and insists on his, so we have reached an impasse. He has said if we don’t agree and sort it out, terrible things will happen (but hasn’t said what those are). Please, does anyone have any advice?
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Comments
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Put the house on the market.
Take off all the selling costs and split the profit once the mortgage and all other costs have been paid.
Use the agreement you had drawn up as a guide so give this agreement to the solicitor who is handling the sale.
Can't see your EX and his brother the solicitor telling another solicitor they want more if he/she has the document in there possession.0 -
I'm no expert so with that rider, my thoughts are that it may have been the intention of splitting any equity in the proportion 57/43 after your deposit had been taken out but the wording of the DoT is crucial.
Do you have anyone you can stay with until this is sorted or at least be with you when you tell him that you will be getting legal advice (if he's made the treat of terrible things happening in writing make sure you have a copy kept away from the property).0 -
Did either of you seek independent legal advice after the DOT was drawn up. To ensure that there was no ambiguity or misunderstanding in what had been drafted. Prior to signature.He says the Declaration should have said my deposit was taken out first and it doesn’t, so I lose out.
A major omission from the DOT. If this is correct.
Who organised the drafting of the DOT?0 -
Who drew up your deed of trust?
If it was done by a professional have you sought their advice?
Also, perhaps you could post the exact wording of the deed; especially if there are any definitions eg equity may be defined as value net of the deposit in which case you'd be protected.0 -
presumbly you had the greater share of the house as you supplied the deposit so it is already accounted for?
Therefore as above it is a straight split IF it sells for 350k then he is entitled to 43% of the equity 48K
The other way of doing it would have been to give you the deposit back then 50% equity each when the deed was drawn up.
If you take the deposit out of the equity and then split 43% he is being doubly penalised?
Having said that get another estate agent to value on the basis of selling within 6 weeks with party wall issues ongoing and use that as the valuation?
a 320K selling prices would give him 35k.0 -
If you take the deposit out of the equity and then split 43% he is being doubly penalised?
This isn't strictly true, if the deposit is simply returned with no interest then the OP loses out on the investment opportunity of their 48k. I'm hoping that is what the deed sought to do and maybe there is a critical definition or wording that has been overlooked.0 -
(if he's made the treat of terrible things happening in writing make sure you have a copy kept away from the property).
That's some treat!:eek:0 -
Thanks everyone. The percentages seem to be correct only if it is the ownership that is split then share of mortgage debt deducted. This is because the mortgage debt was included in the original calculations. So, for example if it's split when we have paid off the mortgage and the entire property = equity (so we deliver on the contributions pledged in the DoT), the shares work out effectively as ‘my contributions + share of value increase’ to me, and ‘his contributions + share of value increase’ to him. This scales to any point in time depending on the amount of mortgage that has been repaid and the respective debt deducted, and shares any profit based on our respective level of investment. So the figures are correct as is and don’t allow double counting, but only if the percentage split is for ownership and the mortgage then deducted. There would be double counting if you first took out the deposit and then did the split according to those percentages.
If it applied to splitting equity, the amount he would be entitled to changes depending on how much of the mortgage he's actually contributed to and thus his share the equity that has been released, so a percentage wouldn't work in that situation. For example, if we sold as soon as we bought the property, all the equity would simply have been represented by my deposit of £47,000, so how could he be entitled to a 43% share of that?
As I mentioned, I did contact the solicitor and they said that the figures and the percentage split was correct and that we would get the same share at any time (which matches the scenarios I mentioned above under the conditions of ownership split by the percentage). They have not yet responded to my query about the wording not actually showing that. We didn't take independent legal advice separately - we paid for the DoT to be drawn up (included in the fees split), and provided all the figures so they could do that. I thought that would be enough - clearly I should also have paid a second solicitor to check it!
Also, we can't sell the property because no mortgage lender will lend on a property with a current dispute, which is what a party wall award in progress represents (and it's on record). So this is why we have to wait for that to be resolved before it can be put on the market - and he doesn't want to wait. Even if it's sold, if the wording does indicate that the split only applies after the mortgage is deducted, that is the effectively the same as the current equity split he's proposing, so it seems I would lose out either way.
I’ve transcribed the relevant bits of the DoT below (identifying info removed) and see that mortgage redemption is mentioned in clause 1 but not clause 2.4:
The purchase money, being £310,000, paid in consideration of the transfer was provided as to the initial deposit of £47,000 by me, and as to the remaining balance being the sum of £263,000, borrowed by me and him jointly, from the Bank.
In respect of the renovation costs, both me and him contributed equally to the total sum of £20,000.
In respect of the fees and costs related to the purchase, both me and him contributed equally to the total sum of ~£7,000.
Me and him, therefore agreed by signing this Deed that in the event of a sale or transfer or such other disposition of the Property, the net proceeds of sale should be applied or the value attributed in the manner hereafter appearing.
Now this deed witnesseth as follows:
1. Me and him shall hold the Property on trust to sell it with power by unanimous agreement to postpone sale and hold the net proceeds of the sale, transfer or such other disposal upon trust (after the deductions of all legal costs, estate agent fees, redemption of mortgage(s), charges and all other incidental costs in respect of the transaction) upon trust from themselves in the following percentages:
1.1 Him: 43.05%
1.2 Me 56.95%
Me and him hereby covenant…
2.4 On completion of the sale of the Property (other than by way of purchase by one part of the other’s share) the proceeds after deduction of such estate agent commissions, legal fees and disbursements shall belong to me and him in the manner stated in Clause 1 above;0 -
It is difficult to give an response without the full wording; whilst you may think you have included the relevant bits maybe you haven't and therefore you'll get the wrong advice or steer people to your own conclusion. I know this isn't what you want as you want your money but partial info will most likely lead to the wrong answer.
However, on the limited info the wording refers to net proceeds, this could be net of just the fees or or could be net of your deposit being returned to you.
How is net defined or is there no definition/context given?
Oh and I think I'm clutching at straws on your behalf as I think you've signed a bad deed. Sorry for your predicament.0 -
Here is the full text from the DoT (without identifying info). There is no other text in the document.
Dated X of X 2015
Trust Deed
Relating to Address
Prepared by Solicitors
This deed of trust is made this X day of X 2015
Between
(1) Him
(2) Me
Whereas:
A. By a transfer dated X 2015, me and him purchased Address (“the Property”) and this Property is registered in their names as proprietors at the Land Registry under title no. X.
B. The purchase money, being £310,000, paid in consideration of the transfer was provided as to the initial deposit of £47,000 by me, and as to the remaining balance being the sum of £263,000, borrowed by me and him jointly, from the Bank by a mortgage dated (blank – there’s no date filled in here). The Property was charged to the lender to secure payment to the lender by way of a mortgage.
C. In respect of the renovation costs, both me and him contributed equally to the total sum of £20,000.
D. In respect of the fees and costs related to the purchase, both me and him contributed equally to the total sum of ~£7,000.
E. Me and him, therefore agreed by signing this Deed that in the event of a sale or transfer or such other disposition of the Property, the net proceeds of sale should be applied or the value attributed in the manner hereafter appearing.
Now this deed witnesseth as follows:
1. Me and him shall hold the Property on trust to sell it with power by unanimous agreement to postpone sale and hold the net proceeds of the sale, transfer or such other disposal upon trust (after the deductions of all legal costs, estate agent fees, redemption of mortgage(s), charges and all other incidental costs in respect of the transaction) upon trust from themselves in the following percentages:
1.1 Him: 43.05%
1.2 Me 56.95%
2. Me and him hereby covenant –
2.1 To observe and perform all covenants restrictions conditions and stipulations at any time affecting the Property and the terms and conditions of the mortgage;
2.2 To keep the Property and its contents insured against all usual risks to the full reinstatement or replacement value thereof and to pay the insurance premiums thereof and to apply any monies received on any policy of insurance effected on the Property and/or its contents in the replacement or reinstatement of the thing damaged;
2.3 that neither party shall create nor purport to create any charge mortgage lien or other interest in respect of the Property or any part of it;
2.4 On completion of the sale of the Property (other than by way of purchase by one part of the other’s share) the proceeds after deduction of such estate agent commissions, legal fees and disbursements shall belong to me and him in the manner stated in Clause 1 above; and
2.5 Me and him further declare that they will make such applications to the Land Registry and execute and do all such documents acts and things as may be necessary to procure the appropriate registration or entry in the Register of the Title now allocated to the said Property to give effect to the Trusts hereinbefore declared.
In witness whereof the parties hereto have hereunto set their hands the day and year first before written
Signed as a Deed by the said Him in the presence of Witness
Signed as a Deed by the said Me in the presence of Witness0
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