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splitting proceeds from house sale when tenants in common and different contributions?

(21 Posts)
justmeand2DC Sun 13-Mar-16 21:11:25

Hi, I wonder if anyone has any experience of the situation I am in? I recently split with XP and remain in the family home with our 2 DC. We own the house as tenants in common and there are 7 more years to go on the mortgage. We have no written separation agreement of any kind, he simply left and the understanding was that we would sell the house and split the proceeds when DC2 finishes school which is coincidentally around the time that the mortgage period finishes. He is paying maintenance towards the DC but I am meeting the cost of the mortgage on my own since he left.

I had thought that the proceeds from the house would be split equally but someone told me that as we are tenants in common and there is no trust deed specifying the shares in the house I may be entitled to more as I will have contributed more to the house, paying the mortgage on my own for a quarter of the period. Does anyone know if this is correct? I was thinking of seeing a family lawyer but if this is a fallacy then I may not bother.

Collaborate Mon 14-Mar-16 11:09:36

Post separation contributions by one owner to the reduction of the mortgage debt will be dealt with by "equitable accounting". This is normally done by agreement, but you would be unwise not to record that agreement now, before you pay down the mortgage, rather than wait until the house is sold.

justmeand2DC Mon 14-Mar-16 13:03:34

Thanks but what if it's not agreed? I can't see XP agreeing to anything other than 50% split and legal costs are so expensive it might not be worth my while pursuing unless I was fairly likely to get an increased share. House is currently worth around 1 million mark and will be more in 7 years so may be worth it even to get an extra 10%.

Collaborate Mon 14-Mar-16 13:30:15

Then convert the mortgage to interest only.

justmeand2DC Mon 14-Mar-16 13:39:16

Actually currently half of mortgage is interest only so I was also wondering what happens at end of mortgage period? It will be £50k remaining, half of original purchase price, I could pay it off if it gives me a higher share but otherwise it seems unfair to pay it all as lump sum and still only get 50%. But what would bank do about capital if mortgage period ends and it's not paid back but we've never had any arrears? We would be intending to sell but maybe it wouldn't be sold at that point? I read somewhere in light of PPI etc this could also be considered misspelling and FSA has said banks have to give people reasonable time to pay.

Collaborate Mon 14-Mar-16 14:23:00

You'd need to agree interest only with the lender. The agreement will be that you repay the £50k at the end of the term. That is the responsibility of both of you, equally.

You'd need to remortgage or sell.

Don't worry about endless "what ifs." Just ask him, and point out that if he doesn't agree, then the mortgage will fall in to arrears, affecting both your credit ratings. Presumably you need to repay £25k in 7 years (if half is capital repayment), so £3,500 a year. I don't know of anyone who would pay that simply to maintain their credit rating.

justmeand2DC Mon 14-Mar-16 14:54:59

Thanks collaborate could I ask if you work in the legal field or similar or just have personal experience? XP currently has debts and credit problems so won't be bothered about arrears affecting his rating (although the mortgage is with the bank he has current account with, I don't, so they could take arrears from his salary payment). I would like him to pay half of the money I have spent on essential house maintenance (roof, replacing rotten window frames etc so essential, not things that only I will benefit from) so far I have spent £10 K since he left as these things were causing a lot of water damage and couldn't be left. There is more should be done before house sold also. I can refuse to put house on market until he agrees to pay half of costs however if the bank are forcing me to sell to repay capital I won't get that money back from him. I know XP won't be reasonable or agree to anything, he refused to sever the joint tenancy for no good reason except to make things difficult for me so I had to serve him with the notice.

Collaborate Mon 14-Mar-16 15:13:39

I'm a solicitor.

You should expect to have to pay for renovations yourself but get credit for the increase in value of those renovations when you sell.

So, if you pay for a new roof, and that costs £30k, if the house is worth £20k more when you sell, and that's due to the new roof as against the old, then you get the first £20k.

If you replace a tired old kitchen, but when you come to sell, that "new" kitchen has by then also become tired and old, you won't get any credit for that.

If you can't agree how to split the proceeds when the time comes, one of you will have to take it to court. That's when you need to show meticulous records for everything you've spent. Keep everything. I assume he's paying you no more than the CSA would expect him to pay - make sure you retain proof that he's not paying you more than he should, as sometimes we hear arguments that excessive payment of maintenance stands as a contribution to repayment of mortgage capital.

justmeand2DC Mon 14-Mar-16 15:47:14

Thanks Collaborate this is super helpful. I have been keeping all the receipts from the work and photographing before and after eg rotten window frames, water damage etc. So could I take the sale price if our neighbours house 4 doors away identical specs as what house was worth when he left? But how can I show how much value renovations have added as house would increase in value over 7 years even if left to fall into disrepair ?

justmeand2DC Mon 14-Mar-16 15:53:51

Yes you are correct that he's paying only the minimum, despite saying he would contribute half of uniform and extracurricular costs in addition to minimum he has reneged on his promise. I will keep records to prove that too, thanks for the suggestion.

Collaborate Tue 15-Mar-16 08:17:55

You determine how much your improvements have added value at the point at which the house is sold. A surveyor will be able to report on that.

justmeand2DC Tue 15-Mar-16 09:31:16

Thanks Collaborate! And you don't think it's worth my while trying to claim more than 50% of the sale price based on paying 7 years of the mortgage on my own? Also it may have no bearing but 2/3 of the monthly amount I'm paying is a secured loan we took out towards doing a loft conversion. This is all repayment and I will have paid back 50% of it on my own due to it being over a shorter period hence why the payments are higher than the actual mortgage. This will definitely add value to the house giving us an extra bedroom and bathroom! Maybe I could claim a larger share of house for this?

Collaborate Tue 15-Mar-16 09:57:26

You absolutely can and must claim for the capital you've paid off the secured loans since separation. Be a good idea for you to get settlement figures for both. You can't get any credit for paying the interest though.

Would be a good idea for a formal trust to be entered own to - will give you security for the next 7 years (against him applying for a sale of the property) and protect you against his creditors (who can still secure his debts against his share of the property).

justmeand2DC Tue 15-Mar-16 10:50:07

How do you mean settlement figures? The bank gives me annual statements so I can show how much was left at the time when I took over the full payments and I also have the paperwork at the time the loans were taken out showing the original amount. The interest isn't much as we are on one of those guaranteed base rates linked to BOE rate so been 2.5% for ages, hopefully will continue as I know XP would refuse to sign remortgage forms!
We actually have 2 secured loans, the first was equivalent to the total price of loft conversion building work then the second was a bit more diverse about half was various joint debts which presumably I can't claim for and the rest was for the costs of finishing off the loft conversion (bathroom fittings carpet etc) and also maintenance to outside of house ( exterior paint work, scaffolding, replacing rotten window frames etc) so presumably if I can find receipts for these costs I could also work out how much of this I have paid back on my own?

Collaborate Tue 15-Mar-16 11:05:40

Of course you can claim for the joint debts.

In fact, as they;re not referable to the purchase of the property you can claim credit for his share of the interest payments too.

Write to each lender and get a settlement figure at todays date.

justmeand2DC Tue 15-Mar-16 11:24:12

It's only one lender the same as our mortgage is with. So a settlement letter has more weight than a statement of outstanding amount? Looking online the amount remaining is £42k so could I claim the £21k to be deducted from his share of the house although presumably the settlement figure would be less, is that what I should base it on?
Collaborate are you working in family law as it seems to me I need to get all my documents prepared and then make an appointment to get something drawn up

justmeand2DC Thu 17-Mar-16 10:05:03

I have obtained verbal settlement figures for the 2 further advances which are secured on the property, to be confirmed in writing within 5 working days and together these are slightly over £42K.

So should I be looking to get £21K off XP's share of the house when it is sold or should I ask for the interest to be included also? I get an annual statement itemising each monthly payment so will know when the house is sold how much I have actually paid but because it's variable rate interest won't know in advance how much the total will be.

Sorry for all the questions but I'm still a bit confused about what structural/maintenance stuff I could expect XP to contribute to. Obviously not our new kitchen which we will get the main benefit from, obviously yes a new roof but what about exterior paintwork, replacing rotten window sills etc leaving the house in a better state than it was previously but not actually adding anything to the structure? I have before and after photographic evidence of the state the house was in when XP left (rotten exterior wood, water damaged ceilings etc) and how I have fixed it. I also have had re-wiring done to bring it up to date with current electrical regulations as without that I couldn't get our electrical shower in the second bathroom replaced as the wiring was not compliant with current regulations. So would I ask a surveyor to estimate how much the house would be worth with and without these works?

If we enter into a trust now then presumably I can't then ask for a larger share at the point of sale but how do I know how much more to ask for at this point if I don't have the survey done until we are ready to sell? Would the trust deed stipulate that I get the additional value from any alterations made without specifying how much this might be?

Ideally we would get something drawn up and agreed without having to go to court but I'm not sure what I should be asking for, I had no idea before starting this thread that I could claim for XP's share of the joint loans so that's good news!

Collaborate Thu 17-Mar-16 11:07:32

Anything that merely maintains the property, like painting etc, is something you have to do and you won't get credit for. It's actual improvements that enhance the value that you get credit for.

The loan that wasn't spent on the house is just like a credit card debt for day to day expenditure. The fact that its secured against the property means that you have a greater interest in ensuring it's paid but that's as far as it goes. You should pay the interest on any loans taken out to buy or spend on the property, and not get credit for that. Capital repayments you should always get credit for, as well as interest on the non-property loan.

It's easy enough for the trust to give you credit:

On the sale of the property the proceeds shall be divided as follows:

1. To repay the mortgage with x, provided that if the amount owing (y) is less than z, the difference between y and z shall be paid to Justme. If the amount owing is greater than z, Justme shall be responsible for paying out of her share the amount by which y exceeds z.

2. To repay the secured loan with A.

3. To repay the secured loan with B.

4. To pay the legal and estate agents costs of sale.

5.To pay to Justme an amount as follows:

i. The amount by which the debt to A has reduced since March 2016, when the amount owing was £Q.

ii. The aggregate amount of payments (of interest and capital) made by Justme to lender B since March 2016, less the amount of payments made by JustmeEX in the same period.

iii. 50% of the balance

6. To pay the remainder to JustmeEX.

In this example loan A is the one for home improvements and loan B is the other.

One alternative way of dealing with loan B is that you calculate what % of the full value of the property that represents (say you owe £20k and the property is worth £400k, it's 5%) and that entitles you to add, between 5ii and 5iii above:

"5% of the gross sale proceeds".

Hope this helps. If you're still unsure about anything you really need to make an appointment to see a solicitor.

justmeand2DC Thu 17-Mar-16 11:48:37

Brilliant thanks Collaborate really clear now, assuming "z" is the settlement value in March 2016 of the mortgage itself.

Collaborate Thu 17-Mar-16 13:56:08

Yes - z is the amount owing today.

justmeand2DC Thu 17-Mar-16 14:10:52

Thank you so much Collaborate, this probably seems really obvious to you but I had no idea I could claim the capital repayments back! I was hoping I could get XP to pay back half of maintenance costs on which to date I have spent £10 K but the capital repayments on mortgage and loans I will have made on my own when we sell will be £62K so way better for me!

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