Q In 2007, my boyfriend and I bought a house together for £257,000 plus fees. At the time, I put in around £66,400 and he put in £20,300. Our initial interest-only mortgage was £180,000 plus the arrangement fee of £781.88, which was added to the loan.
We would like to draw up an agreement that reflects our different shares in the property as I feel it is important to reflect money invested initially. However, there have also been further investments along the way – for example, I recently paid £45,000 for the loft to be converted – and we are having difficulty working out what counts and whether the time of contribution makes a difference.
Other complications are that my boyfriend is a plumber and he has done a fair bit of work to the property in terms of heating, boiler maintenance etc, which otherwise I would have had to pay a significant amount for. I, in turn have done tiling work. Should this kind of investment in kind be counted and reflected in our respective contributions?
I would appreciate it if you would help us to stop arguing about this and reflect our contributions in the best possible way. TF
A Thank you for your timely reminder to any unmarried joint purchasers about to buy property that they should pay attention when their solicitor asks them whether they want to draw up a deed of trust. The answer should be, “Yes, please”, as such a deed can set out, among other things, what share each person owns, who is responsible for paying what, and the procedure that should be followed when one or more of the joint owners want to go their separate ways. Having a deed of trust is especially important when each person is contributing differing amounts to the deposit, buying costs or mortgage repayments.
Most standard deeds of trust set out what each person will get back on sale of the property either as fixed amounts or fixed percentages, or a mixture of both. So, for example, if one of you put down £20,000 and the other £10,000, but you split the mortgage equally, on sale and after clearing the mortgage debt, person one would get their £20,000 back, person two, their £10,000 with anything left over being split down the middle.
However, an increasing number of people are finding that this kind of fixed approach does not suit the kind of situation you find yourself in, where uneven contributions have been made over time. To address this, you can ask for a kind of “floating” deed to be drawn up, which, instead of giving fixed amounts or percentages, gives a formula to be used to calculate each owner’s share at the point the property is sold or one owner buys the other out.
There is no hard line on what the formula should be but using the figures you sent me and assuming a purchase price in 2007 of £257,000 and a mortgage of 18,0781.88 – it could go something like this:
Your total contributions as a couple would be £148,711.38 (ie £126,411.38 plus £22,300), a figure that enables you to calculate the percentage you have each contributed to the value of the property. So your share as a percentage is 85% while your boyfriend’s is 15%. So if you were to sell the property, after paying off the mortgage and paying selling fees, whatever was left over would be split 85:15 in your favour. You boyfriend’s share is so low largely because you have an interest-only mortgage, which means that he has made no repayment of capital unlike you, who have made overpayments.
I’m not convinced, however, that choosing the formula above is going to stop arguments. Your boyfriend may feel – in many respects justifiably – that he has contributed whatever it would have cost you to pay a different plumber or other professional to carry out works on the house. Similarly, you may feel that the time you spent on tiling work deserves recognition in the figures. You should also be aware that until a formal agreement is drawn up with the help of a legal professional, how much you get if you were to split will be based on the agreement you had at the point of purchase.
