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    • tryingtobemoresavvy
    • By tryingtobemoresavvy 13th Sep 19, 3:53 PM
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    tryingtobemoresavvy
    Buying out my ex - disagreeing over Declaration of Trust
    • #1
    • 13th Sep 19, 3:53 PM
    Buying out my ex - disagreeing over Declaration of Trust 13th Sep 19 at 3:53 PM
    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 (itís also likely to cost us a contribution to strengthen the proposed works). I donít 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 donít 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 doesnít, so I lose out.
    He thinks Iíll 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 shouldnít waste money on legal advice (which heís 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 donít 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 donít agree and sort it out, terrible things will happen (but hasnít said what those are). Please, does anyone have any advice?
Page 2
    • Thrugelmir
    • By Thrugelmir 13th Sep 19, 9:56 PM
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    Thrugelmir
    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!
    Originally posted by tryingtobemoresavvy
    Normally the solicitor drafting the DOT will recommend that one party does seek independent advice. In order that any advice can be given to the other if impartiality is required.

    A DOT is a legal document which binds the court should adjudication be required. Too late to say I meant something else.

    How much influence did your ex have in the drafting of the DOT. Solicitors are there to follow their clients instructions.
    ďIf the financial system has a defect, it is that it reflects and magnifies what we human beings are like. Money amplifies our tendency to overreact, to swing from exuberance when things are going well to deep depression when they go wrong. Booms and busts are products, at root, of our emotional volatility.Ē
    ― Niall Ferguson
    • Fire Fox
    • By Fire Fox 13th Sep 19, 10:20 PM
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    Fire Fox
    Thanks everyone, all this advice and support means a lot. I thought we were doing the right thing at the time by getting a DoT but have now learned that you need to get legal advice on your legal advice! I have got some recommendations for other solicitors who've done this kind of thing for family/friends so I will speak to an independent solicitor and find out what to do next. I will tell him I am not agreeing to anything until I do this, so he just has to wait.

    And he says he refuses to move out until he 'gets what he deserves'. I think he deserves something quite different to £48,000!
    Originally posted by tryingtobemoresavvy
    The tables have turned in a few hours!

    Do you have a deck of playing cards? Patience 'old skool'.


    I really don't want to move out because we have a lot of animals, none of which he wants, so I need to be sure they are taken care of, plus the house is full of my furniture and possessions (previously bought or inherited from my late granny), there's actually only a few big-ticket items we bought together as part of the equal-split improvements. So there's so much in here that means something to me and I really worry about it leaving it all with him.
    Originally posted by tryingtobemoresavvy
    Makes complete sense. I am intrigued by "a lot of animals"!
    Declutterbug-in-progress.⭐️⭐️⭐️ ⭐️⭐️
    • ThePants999
    • By ThePants999 13th Sep 19, 10:51 PM
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    ThePants999
    This doesn't look ambiguous to me, but sadly the OP's partner has the DoT on his side.

    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%
    Originally posted by tryingtobemoresavvy
    You take the gross proceeds of the sale, deduct all the costs of selling, deduct the mortgage, and what's left is the net proceeds, which are split 57/43. Silly solicitors.
    • Tom99
    • By Tom99 14th Sep 19, 6:21 AM
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    Tom99
    Clearly the DOT is flawed, you would only own 57/43 when the mortgage is paid off.
    It should have said that out of the net proceeds you get 14% of the gross sale price (which is what your deposit bought) and the rest is split 50/50.
    Whether you have a claim for negligence will probably depend on exactly how you instructed the solicitors who drew up the DOT.
    If you said we would like a DOT which split our ownership 57/43 then that's what you got but if you said here are all the facts draw up a fair deed of trust then maybe you have a claim.
    There is no ambiguity in the DOT your ex gets 43% of the net sale proceeds whether that's fair or not. It's quite likely if it came to a court case they would win.
    • billy2shots
    • By billy2shots 14th Sep 19, 6:45 AM
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    billy2shots
    This is totally new to me as I have always stipulated our houses are 50/50 between my wife and I even though she pays nothing towards the deposit or mortgage.
    However.....

    This seems overly complicated like most things these days. A simple legal document stating one of two options shouldn’t get messy.

    1. Deposit of X to be paid to Mrs from final sale (after fees) then the remainder of the money spit 50/50

    Or

    2. Mrs gets 57% and Mr gets 43% to take into account the extra paid originally in the deposit.



    Option 1 is the fairest and the most simplistic but it looks like the OP didn’t go that route.

    Option two is Russian roulette where house price rise and falls dictate who the winner is. At the moment it seems Mr comes off better. If house prices went up significantly over the time of the OPs partnership, she would be the winner.
    The negative feeling should not be aimed at the partner as you both opted to gamble by choosing option 2. Win some, lose some.
    • SunnyCat
    • By SunnyCat 14th Sep 19, 7:49 AM
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    SunnyCat
    I don't have any advice on the DoT, but I'd like to say, don't let him bully you into paying him off and being left with the problem. (Also, I don't know if I would be going off of the EA's valuation, as that could be overinflated.) It sounds like he's making you feel like you're making him stay by not paying him his share. That's not true - he is entirely free to move out whenever he wishes. My last point is on the "terrible things"... it's difficult to say from your post, but is he being threatening? I know that it can be unpleasant after a breakup, but that's different from one person making threats. If you are scared of him and what he might do, there is help available for that and you should definitely seek it.
    • kirtondm
    • By kirtondm 14th Sep 19, 9:02 AM
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    kirtondm
    I would still go down the route of arguing the valuation - if the property is only sellable by auction with the current dispute it is worth signficantly less. He can either take a share based on the current valuation or wait until the issue is resolved and you can get a decent valuation ( I would get at least 3 estate agents with to be sold in 6 weeks ).

    Im afraid that the DOT seems unambigous to me
    • ethank
    • By ethank 14th Sep 19, 11:46 AM
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    ethank
    And he says he refuses to move out until he 'gets what he deserves'. I think he deserves something quite different to £48,000!
    Originally posted by tryingtobemoresavvy
    And you should not do anything until he agrees to give you your deposit back
    • tryingtobemoresavvy
    • By tryingtobemoresavvy 17th Sep 19, 2:04 PM
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    tryingtobemoresavvy
    Thanks everyone. I have not yet heard back from the previous solicitor who did the Declaration of Trust, but I've located an independent lawyer and will follow up with them for advice.

    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...

    I can take on the mortgage by myself but I agree I'll also have to pay all the costs of sale which seems unfair as I want to sell as soon as the party wall business is concluded.

    To note - the way the DoT s worded doesn't give me a larger increase in profit than him if the house value goes up - it's already gone up in value potentially by £40,000 and his 'share' of that profit according to the DoT is far in excess of mine when you consider the deposit I put in. And that discrepancy remains however much it skyrockets. The discrepancy only reduces as he pays off more of the mortgage - I only get that proportionate increase in value reflecting my larger investment IF we've paid all the mortgage! So something is fundamentally wrong with the wording. I would have been perfectly happy with taking out the deposit and then a 50:50 split of everything else, but the solicitor said this was the standard way of doing things given our contributions...
    • Exodi
    • By Exodi 17th Sep 19, 2:35 PM
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    Exodi
    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...
    Last edited by Exodi; 17-09-2019 at 3:04 PM.
    Know what you don't
    • tryingtobemoresavvy
    • By tryingtobemoresavvy 17th Sep 19, 2:50 PM
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    tryingtobemoresavvy
    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?
    • Thrugelmir
    • By Thrugelmir 17th Sep 19, 2:56 PM
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    Thrugelmir
    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...
    Originally posted by tryingtobemoresavvy
    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.
    ďIf the financial system has a defect, it is that it reflects and magnifies what we human beings are like. Money amplifies our tendency to overreact, to swing from exuberance when things are going well to deep depression when they go wrong. Booms and busts are products, at root, of our emotional volatility.Ē
    ― Niall Ferguson
    • Exodi
    • By Exodi 17th Sep 19, 2:57 PM
    • 850 Posts
    • 1,079 Thanks
    Exodi
    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?
    Originally posted by tryingtobemoresavvy
    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.
    Last edited by Exodi; 17-09-2019 at 3:06 PM.
    Know what you don't
    • tryingtobemoresavvy
    • By tryingtobemoresavvy 17th Sep 19, 3:28 PM
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    tryingtobemoresavvy
    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.
    • Exodi
    • By Exodi 17th Sep 19, 3:34 PM
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    Exodi
    ...

    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.
    Originally posted by tryingtobemoresavvy
    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.
    Know what you don't
    • Thrugelmir
    • By Thrugelmir 17th Sep 19, 5:18 PM
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    Thrugelmir
    But it seems I have to go to court to challenge it, or accept the loss, pending legal advice.
    Originally posted by tryingtobemoresavvy
    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.
    Last edited by Thrugelmir; 17-09-2019 at 5:20 PM.
    ďIf the financial system has a defect, it is that it reflects and magnifies what we human beings are like. Money amplifies our tendency to overreact, to swing from exuberance when things are going well to deep depression when they go wrong. Booms and busts are products, at root, of our emotional volatility.Ē
    ― Niall Ferguson
    • Tom99
    • By Tom99 17th Sep 19, 8:11 PM
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    Tom99
    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!
    Originally posted by tryingtobemoresavvy
    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.
    Originally posted by tryingtobemoresavvy
    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.
    • getmore4less
    • By getmore4less 18th Sep 19, 4:27 AM
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    getmore4less
    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...
    Originally posted by Exodi
    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
    • getmore4less
    • By getmore4less 18th Sep 19, 5:16 AM
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    getmore4less
    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.
    • Tom99
    • By Tom99 18th Sep 19, 5:55 AM
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    Tom99
    Note to anyone setting up a DOD
    Make sure it works for examples by working through some simple ones and test the edge cases
    Originally posted by getmore4less
    Good advice. For starters look at what would happen if a sale took place on day 2.
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