Deed of trust – flexible written agreement

Circumstances change.

Deed of trust

Moving in together

Example – Sonia and Steve are moving in together

Sonia has owned her own home for 3 years. It is in her sole name.

She bought it after splitting up from her husband Mark. She paid £225,000. She lives there with her son Jack. He is 10.

Does Sonia want have a will? Has it been updated since her divorce? Does she want to leave some or all of her share of the property to Jack or divide it with Steve (or anyone else) as well?

Sonia paid her deposit with her share of the sale proceeds of the home she and Mark sold after their divorce. The deposit was 82,000.

There were all sorts of fees and surveys to pay for at the time as well. The total she spent to buy and move into the house came to around £230,000.

She took out a mortgage at the time of £148,000. Over the last 3 years she has paid off around £12,000.

The current amount outstanding is £136,000.

The house has gone up in value in the last 3 years. It’s now worth £275,000.

It’s important to work out how much Sonia’s total equity is worth at the point she and Steve begin to live together. The house has gone up in value since she bought it and the mortgage has gone down.

To work out net equity we take the valuation less the mortgage. This leaves £139,000.

This is Sonia’s approximate capital contribution at the point Steve moves in.

Steve is Sonia’s new partner. He has never been married or lived with anyone before.

He is moving in together with Sonia soon and will be taking over half of the mortgage payments. They will be transferring the house and mortgage into joint names.

He also has £85,000 from the sale of his flat and he will be investing that in Sonia’s house. They are going to redo the kitchen and buy a fancy garden lodge.

Steve may assume his £85,000 is about the same as Sonia’s original deposit and he should have a half interest in the house. And Sonia might think that the garden building is not an investment in the property itself. Often people don’t realise there is another way of looking at a situation, until they talk about it.

The legal title (ownership of the house) after moving in together

The house will be transferred into joint names when the mortgage completes.

This does not have to mean that it is owned in equal shares though.

But if Steve and Sonia want to own it in proportion to the the money they have put in, they need to have this agreement in writing.

If the agreement is not in writing, the documents at the land registry will say by default that the property is owned 50/50.

Sonia and Steve must not expect the general law to deal with their assets for them. If they have an agreement, they must record it properly.

Action Steve and Sonia need to take

Whilst they are filling in all of the paperwork for their mortgage and conveyancing, Steve and Sonia, order a deed of trust and each make a will.

They go through the checklist below to help them navigate their discussion.

They want to set out in writing various agreements they have reached about bills, mortgage payments, shares in the future equity and what might happen if the things no one likes to think about happening, actually do happen.

A deed of trust covers all the main financial agreements they have about living together.

Sonia and Steve know that they need a will and a deed of trust. They’ve been open and honest with each other and the two or three hours they have spent sorting it out are going to give them years of having one less thing to worry about.

If you would like to have a confidential chat about how a deed could help you. Please fill in our deed of trust contact form and we will arrange a convenient time to speak.

Checklist


Will the mortgage be paid equally moving forwards? If not, how will it be paid?

Will the growth in equity moving forward be shared 50/50 or some other way?

Will they each get back the full amount they have put in (Sonia £139,000 and Steve £85,000) before they divide the rest?

Will the bills be shared? (Make a list)

Who will pay the insurance?

Will either one of you have a right of first refusal over the other’s share if you separate?

Will you have a right to carry on living in the property if the other one dies?

If yes, will that right be indefinite or until a fixed time or a new relationship?

What about dependent children? Will a sale of the house be put off until they are independent?

If yes, what happens if the mortgage can’t be paid?

Nicola is happy to announce that she will be joining Taylor Rose MW on 12th July 2022 as a consultant solicitor