How to be fair within a couple if only one of them owns the property

[DoggerelBank]

DD is EXTREMELY lucky and has an inheritance that makes it possible to buy a flat earlier than most people of her age group. She has just had an offer accepted. There's a mortgage, but it's about 75% paid with the inheritance. Her boyfriend will be living with her but will not (at least initially) own any of the flat. They have been together for 3 years and seem quite settled, but not ready for a life-long commitment at this stage - anything might happen as they're still early 20s and just starting out in the big wide world. So ... how should they arrange finances? Aim is:

1. it isn't too messy if they split up
2. boyfriend contributes his fair share
3. boyfriend is not just treated as a lodger - he's more than that and if he helps support with sorting out decoration, hiring plumbers, making it a lovely home, etc etc for years and then they split, it would seem unfair if he was left with nothing to show for it.
4. boyfriend benefits in some way if she/they decide to rent out a room to an actual lodger, or for AirBNB, etc., so they both have a financial incentive to do this if they choose to, e.g. if interest rates go up.

They'll be earning similar amounts, I believe. We're thinking of something along the lines of him paying what would be the going rate for a rental, with a legal agreement that if they split, they add up everything she's put in, initially and through mortgage contributions, and what he has paid her, and work out the proportion that is his contribution, and give him the correct proportion of the value of the flat at the time they split. That could get messy if she can't afford to pay him out, but is there any other way that would be fair to both? I'm struggling to see how best to protect them both from feeling taken advantage of in future.

Anyone got any words of wisdom?

The trouble is being in a relationship with someone apparently gives someone a claim on your property! I’ve known male partners try to do this when living in the home of a female owner occupier. Don’t let him fix anything around the house! Seriously!

They work out the rental value on the house.
Both pay that and half the bills into a joint account.
Daughter takes out her mortgage payments from the account.
All bills are paid from the account , from joint house purchases, ect. At the end of a year they can have a holiday from the balance, should they split half the accounts balance after outstanding bills goes to each.
Should house need big repair DD can take from account and give him the same value from the savings.

@CloseYourEyesAndSee

She should pay her mortgage and they should split the household costs half way. He can then build his own savings and she will keep her asset. If they get married/get serious he can invest his savings in the house. If they split up he will have a nest egg and she keeps her asset. If the mortgage is 25% she will still be paying much less than most people and will also be able to save.

So you are suggesting he lives rent free? I am always absolutely flabbergasted by this on mumsnet. I've never ever known anybody suggest that a young man should live rent-free when talking about this with friends. Why on earth should he be given the opportunity to save all that money? They are in their early 20s and he might be gone in a couple years, with several thousand pounds worth of money in the bank.

I'd suggest you start with your DD talking to a solicitor. Money well spent if it protects her inheritance. The boyfriend may need to sign to sat that he has no beneficial interest in the property. That would change upon marriage.

This might be worth reading about beneficial interest in a property.
england.shelter.org.uk/professional_resources/legal/relationship_breakdown/housing_rights_of_cohabiting_sole_homeowners/occupation_rights_if_one_partner_is_the_sole_owner

There is an element of capital repayment, and interest within each monthly mortgage payment.

As far as I recall from mine the capital is a third and the interest is two thirds or so. You’d need to check though. It will be on her mortgage statement.

Anyway. I’d suggest she pays the capital herself and they split the interest payment between them as it’s like rent, you pay it to live there but you arent paying off capital.

So say the mortgage is £600. Of that £200 will be her paying off the bricks and mortar, and £400 will be the interest she pays to the bank for their lending her the money. I’d suggest she pays £200 capital and £200 interest = £400. He pays £200, his half of the interest. They half the bills equally.

However I don’t know the legalities of that. I’d suggest legal advice. You may have free legal advice through your union or work or through house insurance or something else. You could ask as if you are giving your daughter an inheritance and how much should the bf be able to pay without it having an impact on his entitlement to any money if they split up.

Prenups are not legal in the U.K. so I’m due course if they marry she should 1000% seek legal advice on how to protect her chunk of the asset so he can’t get it if they split.

@Cocomarine

I think that allowing him to live in her house rent-free would be more than generous enough. They’re not married. They don’t have children.

I would look at the costs of splitting all bills except mortgage. She pays mortgage. All those plumbing and decorating bits you mention. Does not need his “permission” to get a lodger / AirBnB (but is open now that it might happen) and doesn’t give him any money from it.

That probably leaves her worse off than him if they have a similar income (dependant what the 25% mortgage is in absolute terms). But that’s fine - it’s right she should pay more, for her asset.

He can save what he would have paid on rent to give himself security. And on a practical side, that might even up their disposable income.

It’s her asset, and she doesn’t owe him any kind of share in it.

Yes I would advise doing it like this.

He shouldn't get an interest in HER property full stop.

If they decide to marry that's a different story, but I would hope he saves up the saved rent money so he can show he can hold his own