Tenants in common - splitting up but didn't do a trust or will

[Carandache]

My parents gave me a large deposit to pay for the deposit and stamp duty on the house my partner (and father of my 2 kids) bought years ago. At the time, because we weren't married, the solicitor advised that we should hold the property as tenants in common to recognise my parent's gift and to earmark that money for me in the event of separation. We did this - the house is owned as tenants in common. But we didn't take the next steps advised by the solicotor - to do a trust deed and will to set out the terms.

We are now separating. We are still not married. We still have a huge mortgage on the property (we had to get a second mortgage due to his failed business) with 15 years remaining. He is by far the higher earner but we've always paid the mortgage from our joint account.

Do I have a hope in hell of getting the money my parents contributed back if he forces me to sell? I think he wants to buy a house with his girlfriend. I'm pretty sure I know what the answer is but please be gentle on me - I know I was totally stupid not to sort things out properly at the time. Thank you.

The solicitor is not at fault
You don’t have to have a deed of trust but it’s needed if you want to hold the property in unequal shares. The solicitor advised this but op chose to proceed without it

We didnt agree percentages of ownership. We were very distracted at the time. I don't remember even properly discussing it with him, very much doubt he's aware of it at all. There is no deed of trust
From all your responses (thank you) it sounds as though it will be 50/ 50. Also he contributed more to the mortgage each month by paying more in to our joint account which I assume is relevant ?

I am now worried that the tenants in common will make things even worse for me ,does it mean he can force a sale?

This is eye opening. Are you a solicitor? Two conveyancers from different firms have told me tough luck, they don’t have to register the split, although they usually do. They said it’s my fault for losing the copy of the deed.

You need to divide the equity before you take off the mortgage. If the house was bought at £500k and the mortgage £400k, if OP provided the deposit she would own 60% - ie the £100k plus the equally divided £400k.
If they then sold the house immediately at the same price and divided it your way, OP would suffer an instanteous £40k loss.

To say again, the fact OP provided the deposit is irrelevant. In the absence of a deed of trust, they each own 50% of the property. However, if there was a deed of trust, @shorttwoshot is correct about how the equity is divided.

Imagine the house was purchased for £500k with a deposit of £100k and a £400k mortgage. If the mortgage is still £400k and the house is sold for £500k, that leaves £100k to be divided between the parties. In that situation, the only way OP would get the full £100k is if there was a deed of trust saying she owned 100% of the property. If she owns 60% of it, say, she gets £60k. She would indeed suffer a £40k loss.

You can't divide the equity before you take off the mortgage. The equity is what is left after taking off the mortgage.

The fact he contributed more to the mortgage is irrelevant. It is still a 50/50 split unless he agrees otherwise, or you have evidence there was a common intention there should be a different split.

Being tenants in common will not make things worse for you. He may be able to force a sale regardless of how the house is owned.

Nope. The deed of trust determines how much of the property you own, not how much debt you have. Joint mortgages are 50/50 (actually, technically they're 100/100, you're liable for the other person, but let's not focus on that right now). So in our example OP is owed 60% of the house value and owes 50% of the debt.
If you remove the mortgage first, then OP would also have taken 60% of the debt.
Otherwise it never makes sense - either the person paying more loses immediately or the other person has to agree to hold 0% of the property.

You’re incorrect. The first claim on the property is the mortgage company or any other debt that is secured against the property. It’s completely irrelevant who paid what deposit. If the value of a house goes down, the debtor still gets what has been charged against it. So where a property is bought for £500k with a 20% deposit and the value drops to £440k, the debtors will still receive their £400k leaving less equity in the property.

I never said the debtors wouldn't recieve the full amount. I said that the deed of trust specifies different ratios of ownership and debt for tenants in common.

A deed of trust doesn’t specify the debt. I am currently managing my stepfathers finances following my DMs death last year. They had a deed of trust for TIC in the ratio of 80/20 to my DM, which she has left to her children in her will. The property has a charge against it. Both my solicitor, the equity release company and the finance dept at the council (SF is in a care home and they are funding him) agree that although the debt now technically belongs to my SF, it will have to be paid in full when the house is sold then the remaining equity will be split according to the deed of trust.

Sounds like we're agreeing - that the debt is separate from the deed of trust. In your case, as you say, the debt belongs to your SF, but it is a complicated situation, and the mortgage has to be paid.
In the examples I gave I was thinking of a more straighforward example where both parties can pay back the 50/50 debt after the proceeds have been split according to the deed of trust.
This is what I did when I sold my house as TIC a few years ago.
And I'm sorry for the loss of your DM.

You may think it doesn't make sense, but I am correct as to how it works.

Imagine the owners of our £500k property have entered into a deed of trust splitting the property 70/30 - after all, the split doesn't have to follow their initial contributions. It can be anything they choose. When they sell the property, if your approach was correct, there would only be £100k proceeds from the sale but the one with a 70% share would be due £150k, so the other party would have to find £50k. That would be ridiculous.

Indeed, let us imagine that one provides £70k of the deposit and the other provides £30k so they settle on a 70/30 split. When the house is sold, according to you, the one you provided £70k will now get £150k, the one who provided £30k has to find £50k to pay the other. That would be even more ridiculous than the last paragraph. What would happen, of course, is that the equity would be split 70/30, so they would both get their money back.

Yes, in your scenario of a 60/40 split where the party getting 60% has provided the entire deposit, that party makes a loss unless the house has gone up in value sufficiently (or the mortgage has reduced sufficiently) to avoid that. If they really want to avoid a loss, the deed of trust can specify that they get the first £100k of the equity plus half of the remainder. But, if the deed specifies a 60/40 split, that is how the equity will be split.

If I had borrowed £200k to own 30% of a property worth £500k, so £150k, them yes, I should owe £50k. Nothing ridiculous about it.

The same thing has just happened to me. I submitted a part 8 claim to the court as my ex was being difficult. We were tenants in common. I could prove I paid the larger deposit and claimed back a share of the cost of money I spent on renovations.

Seek legal advice.I did all my own paperwork but did seek the advice first from a direct access barrister. I got my deposit back, some renovation costs - the rest of the profit from the house was split 50/50 after the mortgage was settled. Ask your parents to provide proof of the funds they gave you being credited to your account and you provide s statement showing receipt of it. They can provide a statement confirming when they gave it you, how much and that it was a gift.

I would never ever put myself in this position again. When we bought our house I then asked my now ex to sign the deed of trust. There was always a reason he couldn't do it.

A simple deed of trust specifies how the proceeds of sale (i.e. the amount left after the mortgage is paid) are split. Yes, you can get a more complex deed of trust that works the way you say. But I am correct as to how a simple deed of trust works.

Apologies - I think we got our wires crossed.

There are multiple ways a deed of trust can be written. Up thread I believe we were talking about a deed of trust specifying how the proceeds of sale would be split. That works the way I described. Other forms of deed of trust are possible, including specifying matters such as who pays the mortgage. A deed of trust can work the way you describe.

This is, in any event, irrelevant to OP as there is no deed of trust in her case.

Can you buy him out ? That's really your only hope of keeping the house. I'm sure he will want a clean break anyway, so unfortunately he can force the sale. Joint tenants or tenants in common is not important in this situation. It's simply joint owners of a property and whose on the deeds.

This is what I thought could happen. If you have clear evidence you paid a larger deposit then you would be entitled to that back.

I think a lot of the confusion here is the assumption that larger deposit gives you a greater share of the equity. I didn't suggest that when I posted, simply that the deposit was larger on your part therefore you should be paid that back, before the equity is divided 50/50.

Him having a larger salary and paying more into the joint account isn't relevant as both names are on the mortgage and paying equally.

I'm afraid thsat OP has unneccearily been given little hope here, and some incorrect advice.

I am assuming that the transfer in to OP's name contained a declaration that they would hold as tenants in common but was silent as to the shares. If it said "equal shares" or something similar, that would be absolutely determinative and the end of the story. I doubt OP would have asked the question here if that was the case.

As there is no declaration of trust it is established caselaw (Stack v Dowden, Jones v Kernott) that the court will approach this in the following way:

• the starting point where a family home is bought in joint names is that the parties own the property as joint tenants in law and equity
• that presumption can be displaced by evidence that the parties' common intention was, in fact, different, either when the property was purchased or later
• common intention is to be objectively deduced (inferred) from the conduct and dealings between the parties
• where it is clear that the parties had a different intention at the outset, or had changed their original intention, but it is not possible to infer an actual intention as to their respective shares, then the court is entitled to impute an intention that each is entitled to the share which the court considers fair having regard to the whole course of dealing between them in relation to the property
• each case will turn on its own facts, and
• financial contributions are relevant but there are many other factors which may enable the court to decide what shares were either intended or fair

It seems to me therefore that OP may well get her deposit back, or an enhanced interest in the property referable to the percentage of the property that her deposit purchased.

Thanks so much everyone for your help with this. It's obviously a complex situation. I hugely appreciate it. I do have further questions but I need to read through your replies again in detail when I get some time to myself. Will post again as soon as I can.

So... @carandache - what happened?
In a similar position.

@Buffypaws please start your own thread. You will get a lot more relevant advice based on your specific circumstances if you do so.

My son has a deed of trust
his deposit 100 k is ring fenced so if him and his partner split he should ( providing no huge price drop ( get that back first )
then the equity is split 50 -50 as they are both on the deeds with a 50 -50 share

my son couldn’t buy without his partners income and they both pay 50 -50 on the mortgage

HI can you update me on how you got on here please? I am going through a similar process and about to start the legal process but do not want to waste my money.

Please update on how you got on 🙏