Help..partner paying full deposit. How can I legally protect myself

[Eiremogra]

Apologies for this really long post!!! Really hoping for some advice!Buying a property with my partner who is putting in full deposit amount..what legal steps should we put in place to protect both our interests?

My partner and I are planning on getting a mortgage together. He is putting in the full amount of the deposit. I earn a little more than him and together we have been AIP a decent mortgage. My question is what legal steps should we take to protect us both. I know a joint tenancy is best - allowing the property to be left to the other party in the event of a death but I’ve also been reading about a ‘deed of trust’ which would ensure other agreements should we break up. He has said that he would expect to get his full deposit repaid by me should we break up...but..he would not be able to get a mortgage anywhere near our AIP on his own (without my salary) plus if we are together for many years within that time I have paid towards furniture/repairs/daily living costs..surely this should be considered as a major contribution? A friend has advised that the deed of trust should indicate a time limit, i.e if we split within 5 years he gets his full deposit back but after that period of time I do not have to repay him. Even if we do split within the capped time frame surely the amount to be paid back to him by me would be half of his deposit contribution? Really hoping for some solid advice to protect me financially... I have been badly ‘stung’ in the past by an ex partner who left me in a lot of financial debt so need to ensure all measures are taken this time around!!

Declaration of Trust, using a solicitor. It will protect each other’s shares.

Use a solicitor; your conveyancing solicitor may be able to do, but we refer them to our Wills department.

Could you pay half the deposit slowly?
Work out how many months it would take for you to pay off as extra on top of your mortgage payment (extra £50-£100 a month?). As long as you keep under the overpayment threshold you are fine and reducing some of your future interest charges.

The Deed is the basis of owning as Tenants in Common rather than Joint Tenants.

Which will probably suit you better.

If you want your DP to inherit your share of the house you can leave it in your will.

Would his deposit not come out of the equity that would be in the property? I.e if you break up and sell in five years with 30% equity and he put in a 10% deposit.. . Then he would get 20% of the equity and you would get 10%? I know property prices might go down and therefore that could be lost but that's the risk isn't it?

It was many years ago so not sure of the legal rules now (& I wasn’t married) but the agreement written meant when we actually did separate we both got the back the deposit back we put in & as we had both paid 50/50 towards mortgage equal of the profit made.

It shouldn't be a case of you paying the deposit back to him. $x worth of equity equal to his deposit can be ring fenced and that would be paid to him from the equity in the property when it was sold or you bought him out. Then the rest of the equity will be split as per agreed ownership. If the equity is less than the deposit he put in he would get all the equity, but would lose any amount of his deposit the equity wouldn't cover.

If you're paying half the mortgage each, then that would usually be a 50/50 split on remaining equity. If you're paying more mortgage than him or making other material contributions you could agree a different split of ownership. If you feel that their should be a time limit on the deposit being ring fenced you'll have to agree that together. If you buy as tenants in common than you have no control over who he leaves his share too in the event of his death you might end up having to sell or pay out equity to a third party. Their are pros and cons to both forms. Worth having a consultation with a lawyer to go through your options.

I wouldn't worry from your end, it's your DP that is taking all the risk by putting all the deposit in, as, in the event of a split, legally you would be entitled to half, just because you're on the mortgage, regardless of putting less or even no money into it. Regarding repairs etc. you could class it as payment in kind for his deposit input, then, no you would not get that money back, but he wouldn't get his deposit either. When you've put in as much as deposit was, the why not just split the cost of any work on the house you do?

Thank you all so much for your advise! I’m finding the whole process very stressful :( We live in Scotland so it will be a Cohabiitation Agreement that we sign. My concern is that he wants it stipulated in the agreement that I will repay his half of the deposit if we split. I know we have to protect both our interests but AIBU to think this is very unfair? I’m a first time buyer so we will both get the financial befits of that as well as a bigger mortgage due to my salary. I don’t know what the best thing to do is :(

Sorry, I think he should get his deposit back if you split. So it would work like this

Purchase 200k
Deposit (him) 50k
Mortgage 150k

You break up, home is now worth 250k he gets his 50k deposit back, leaving 200k. You pay off the mortgage of 150k (in reality will be less than this as you will have made repayments) you split the 50k equally between you.

You may earn more but he has saved/inherited all the deposit. You wouldn't be buying if he didn't have the deposit.

Worth bearing in mind that values can go down as well as up so you really do need a solicitor here.

I agree with PP that he is entitled to get back the deposit that he put in, a friend of mine did this (in Scotland) as she put down the deposit for her house and her partner didnt. The agreement stated that she would receive the full amount she put in in the event that they split and sold but if the property sold for less than the original value it was bought for then the amount she received would be in proportion to that, which meant that her partner would not be paying out of his own pocket as it was in line with the equity of the house.
To be honest I don't think it's fair to assume that you are entitled to a share of the deposit that he has put in, over time you'll increase your equity in the house and you'll have been paying into that so of course you would be entitled to half of anything over what he put in as the deposit. I think that's fair.

His deposit needs to be protected, if I was buying someone who thought me protecting my investment was unfair I would no longer be buying with them.

Sorry, what does he mean that you would pay him the full deposit if you break up?

A time limit sounds fair. Maybe 10 years?

A cohabitation agreement sounds great & can be done in Scotland.

What you have to bear in mind is that if you go on to have children or part-time etc in the future - but there are section 28 cohabitation claims which can also be made.

And do you plan to marry? Or have children? That will change things too.

When I bought a house with an ex, I paid all of the deposit.
He signed a declaration to say that in the event of a split or house being sold the deposit amount comes back to me and any remaining equity is split 50/50.
It’s the only fair way to do it x

Agree with @pelosi, what does he mean by you paying him the deposit? If you split the property will be sold, he will get the first slice of the proceeds to repay his deposit and the rest will be split (I would presume 50/50 if you’re paying mortgage that way, though could be different).

If you are paying for material improvements that you think you should get the benefit of you could amend the deed before doing to recognise this, if you both agree.

Good luck OP.

Why would you keep half his deposit??
If he's paying 20% of the cost then if you sell he gets 20% of the equity paid in a lump sum then any other equity is split 50/50 assuming you're paying 50/50 of the mortgage.
If either of you spend money on improvements try to pay 50/50 to make it easier if you split.

Just to add, we did split up 6 months later. Bought at the height of the market in 2007 and split in April when the credit crunch happened. So house value dropped quite a bit.
I carried on paying the mortgage for a while until house prices crept back up and he signed the house over to me.
He got nothing from it as the only equity was my deposit.

Tenancy in common mortgage would protect you if you earn more and pay the lions share of the mortgage - before I was married to DH our tenancy in common mortgage stated 75/25 in my favour (marriage unfortunately trumps the tenancy in common apparently but now he pays 50/50)

He is entitled to have his deposit back so have that drawn up legally and signed

You could stipulate that in the event of a sale if you tenancy in common mortgage is say 75/25 that you get 75% of any uplift in equity?

Why should you be entitled to some of the deposit he paid in??
I wouldn’t be buying with anyone who questioned my right to protect my assets and/or who felt they had a right to those assets.

As always on mumsnet, if you were the one with the deposit you’d be told in no uncertain terms to protect it and yourself.

I’d make kids the ‘time break’ not time.

I don’t see anything wrong with his request. This isn’t a case of him trying to get one over you legally; HE is he one taking the biggest financial risk here by paying all the deposit.

Of course he’s going to want to protect that - this forum (amongst many others) is full of breakup stories and many of them came completely out of the blue, so even the most romantic, optimistic partner with the best will in the world can’t predict what’s going to happen in 12 or 24 months.

As has been said, there are plenty of ways to do this and then use the equity - if you sell - to ensure everything is shared equally at that point. Make sure you keep a list of all contributions you make to the house in terms of payments, repairs, etc.

My suggestion is to ring fence the deposit to home then tenants in common 50/50 with the other persons share being passed on the the surviving partner. In the event of you splitting it protects you both

It's normally done in % terms so if the house prices drop then this comes out if both or your equity, not just yours

So if he puts down 20% of the value of the house, he gets 20% back if you split up and sell, then the rest of the equity is split 50/50. The deed of trust is needed so the house goes to you if he dies, and vice versa.

As for him not being able to afford a decent mortgage of you split, that's not your problem.

Of course he should get his full deposit back (or near enough less legal fees) if you split up, regardless of time frame? He may not have as high a salary as you, but you don't have a deposit so you need each other equally in order to buy?

Assuming the market goes up then should you come to sell the place he gets his deposit back and you split any extra using the same ratio you used to split mortgage and bills? 50/50 or whatever you decided on if your phone earnings aren't aligned. Money you've put into home improvements etc will be reflected in how much profit you make when you come to sell it.

Otherwise surely you could let him put £50k (for example) deposit down, buy a house, promptly dump him, sell it because neither of you can afford it alone and waltz off with £25k of his money??