Declaration of Trust

[DLCC]

Dear All

I wondered if anyone had any experience of Declaration of Trusts when buying a property with a partner (both divorced, both have children from previous marriages). It does sound unromantic and takes the excitement out of the whole process, but having both been bitten before we want to do everything right this time when it comes to finances. SO, this is the scenario:

I have a property which I’m going to sell, he is in rented. The equity in my property is around £172,000. I was going to put a £100k into a joint property and put £25k into savings (any ideas where would be gratefully received) for each of my sons (10 & 5) and £10k in savings for myself. This means that a) they will have the money for when they’re older, house deposit etc but also b) if things were to go pear shaped with my partner I would have a deposit of £50k towards a new property (plus anything I have put into the new property upon it's sale). My partner will be putting in £30k, but as I work part time, he will be paying the bulk of the mortgage each month (he earns 3.25 x more than me), so say it’s £1700 per month, he will pay £1200 I will pay £500. This will also mean his share in the property will increase as he is paying more of the mortgage but my cash input is larger.

We are going to have a Declaration of Trust drawn up but there just seems to be SO many clauses to think about. If we split up can either of us force a sale? If we split do I get my £100k back plus a share in the equity? What does he get if his cash input is lower but his mortgage payments are higher? How do we split bills? Should we be joint owners or tenants in common? what about provisions for the children? (he has two as well, 11 & 9) should anything happen to us.

My Dad has said that surely it would be better to put ALL my money (including the savings I was going to put aside for my children into the house as it will grow more?) any thoughts on this?

Has anyone been in a similar situation? Any help would be great!

Thanks for you response, can you not have a clause written in to say that these would still stand if you marry? or would it be better for me to write a new will stipulating this?

I have a DoT with my DStepDad, who loaned me the money to buy ex-DP out when we split up. I drafted it (I'm a lawyer, although not a property lawyer) but ours is v simple - no sale allowed in first 5 years, thereafter either can require a sale on 6 months notice. If one party doesn't want to sell they have the option to buy the other out. Upon sale, any equity is split equally after taking into account how much of the mortgage I have paid off (he's not paying any of it) plus cost of any major improvements. Costs of sale split equally.

What goes into the DoT really depends on what you want.

You could say that each has the option to buy the other out if you split up?

If you sell the property then the proceeds could be split as follows:

1. Any outstanding mortgage, including penalty charges, is paif off first
2. You get your £100k deposit back.
3. What is left is equity and you split that 3.25:1, and take into account the costs of sale in the same proportions.

What would you do if the house went into negative equity?

You have to be legal joint tenants but would have to be equitable tenants in common.

Some of the things you want to cover can go into your wills.

Ignore daily living costs/ costs of bills in the DoT but come to an agreement on how they are split. They don't add to property value and are payable in any event.

Make sure there is scope to amend the Deed on mutual consent.

You both need to take independent legal advice.

I think you are right not to invest all of the money

Sorry, typed all of that v quickly as am at work but hope you get it sorted. Get a good lawyer!

Many thanks for your responses.

Lula, we have come to an agreement as to what will happen if we sell and are in profit, the only thing we are slightly disagreeing on is if the property goes into negative equity as per your point above!

If this does happen, DP thinks that we should split anything left over 50:50 whereas I am swaying towards IF there is a profit it should be shared according to the cash contributions made (a combination of our deposits and mortgage payments)? or AIBU? he thinks that if I want a share of the ups, I have to take a share in the downs?

Many thanks