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Division of equity in a jointly owned property


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Hi all,

 

Firstly, thanks for taking the time to read this thread. I'm not sure if I'm posting this in a sensible place, but googling the problem I'm posting about lead me to another similar post in this forum. If there's a more appropriate place to ask this question, then I request that a mod moves the thread. Thanks!

 

I'm writing this on behalf of a friend of mine, in relation to a dispute over the sale of a property jointly owned and the division of any equity such a sale releases. The person in question purchased a property with her partner. They were NOT married. No legal documents were drawn up at the time to determine a specific ownership position for either party, but both their names are on both the mortgage and the deed.

 

He provided the initial deposit for the mortgage, after which time they split all mortgage payments and associated sundry costs (service charges which include ground rent, buildings insurance and maintenance charges for the development) 50/50.

 

After a few years of joint residence, due to irreconcilable differences, they went their separate ways. At that time, he simply moved out and cancelled his mortgage repayments. My friend had to increase her payments to cover the full cost of the mortgage. In the following months they attempted to reach an agreement for how to proceed, discussing both my friend buying her ex partner out, and sale of the house. However, no agreement could be reached on how to divide the equity, which they were advised by solicitors should also form the basis of any buy-out agreement. In other words, that to buy him out she should offer him the amount of equity he would get, as per their agreement, in the event of sale.

 

Those negotiations ultimately broke down and communication ceased. Since that time, my friend has covered the full cost of the mortgage as well as any sundry costs, and her ex partner has presumably paid rent in order to live somewhere else. Several years have passed in the intervening time.

 

This brings us to the present moment in time. My friend has approached her ex partner again with the objective of resolving the dispute once and for all. She has proposed that they sell the house, and they are currently engaged in discussion on how to divide the equity between them. However, I fear negotiations are destined to follow a similar trajectory as last time....

 

The crux of their disagreement centres around her ex partners desire to treat the deposit as a fixed cash sum which he should be repaid, as if it were a loan, before any discussion on how to divide equity, irrespective of the sale price of the property. In other words, if the equity released from sale only adds up to the equivalent cash value of the deposit (the value of the property has decreased since purchase) then he effectively believes he should get all that equity and she should effectively be left with nothing. If the property were in her name only, and he had provided her with the money to purchase the property, then I could understand this point of view. However, in reality, they have jointly invested in the property and must jointly bear the brunt of any reduction in value. Similarly, my view is that he must recognise that a deposit contribution is essentially equivalent to capital repayments made against the mortgage, and does not constitute a debt which would be repaid first (i.e. like the mortgage itself).

 

My friend has sought legal advice which clarified the official legal position as being that both her and her ex are joint stakeholders in the property, irrespective of how much either has paid, and are consequently both legally entitled to 50% of any equity released on sale of the property. Similarly, she has been told that if they go to court, that will be the ruling, and that costs will likely exceed the equity in the property anyway.

 

So, my friend feels in a difficult position. She has been strongly advised by solicitors not to accept less than 50% of the equity since that is her legal entitlement, but that leaves her and her ex partner at opposite ends of the negotiating table with seemingly no common ground. My friend has proposed ways of calculating an equity split, based on total contribution to the mortgage and property by each of them, but her ex partner is only prepared to talk about dividing equity AFTER he has received his deposit back first.

 

My friend feels as though her ex partner just moved out and stopped paying when he decided he didn't want to live there any more, and now, as a consequence of her trying to do the responsible thing and take over mortgage repayments rather than allow them to default, she is stuck in a position where she can't sell without his consent, and he is unlikely to give it because - as she sees it - his demands regarding equity division are so unreasonable as to be unacceptable to her.

 

Is there any legal remedy she can pursue to compel a sale? Is this likely to be any more or less expensive than going to court to split the equity? Is there any way they can agree to sell the house on the grounds that the equity will be held in trust by a third party until such time as they can agree a fair split? That latter option seems like the best idea to me. It has the disadvantage of fixing the equity in cash terms at the point of sale, but equally, it allows her to move on with her life and doesn't require her partner to accept an equity split he feels he can't, just to get the sale under way.

 

Thanks very much for your time, if you've got this far! I appreciate it's a long and torturous tale :p Any help you can offer would be much appreciated!

 

EDIT: Anyone know whether I can edit the title of the thread to fix that typo?

Edited by Jeff255
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I have relocated your thread to the General Legal forums - you do not have to do anything, it is purely administrative.

 

I have also sorted the type out for you :)

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You say "both their names are on both the mortgage and the deed" : is there actually a deed (unregistered land) or is there an entry on the Register at the Land Registry (registered land)?

 

For the purpose of what follows : did the purchase happen after 1996 ?

 

You also say "My friend has sought legal advice which clarified the official legal position as being that both her and her ex are joint stakeholders in the property" : in which case do you mean that they are "joint tenants of the equitable interest" rather than "tenants in common "?

 

If "Joint tenants of the equitable interest" (BTW "equitable interest isn't the same as "the equity in the house"), then this would give rise to the "it is 50/50 if / when sold" despite previous unequal contributions, provided neither had "severed" the joint tenancy. Equally, if either one pre-deceased the other while it is still a joint tenancy in equity: the other "gets the lot " (as long as it isn't homicide!) regardless of what any will says.

 

It may be (for example : if they have agreed

to sell up, even if the terms aren't agreed) that there was a joint tenancy of the equitable interest, and it was severed by agreement (such as agreement to sell). If so, the equitable interest would still be 50/50 (if it had initially been a joint tenancy for the equitable interest rather than a tenancy in common).

 

If it was never a joint tenancy for the equitable interest, then it would be harder than "50/50" to work out each persons share of the equitable interest.

 

So, we need to know if it is registered or unregistered land.

 

If registered : what does the entry on the register at the land registry say (in particular if there are any restrictions in the register that might suggest the ORIGINAL status of the equitable interest was a tenancy in common ).

 

In the end if he is being really stubborn, and they can't agree, she may have to go to court under S14 of the Trusts of Land and Appointment of Trustees Act 1996, where the court will decide (following S15) if the property should be sold, and who gets what share (the court issuing a "property adjustment order" if need be).

 

Has she suggested to him he take some initial legal advice, and then he might come to some agreement , if he knows

A) he won't get what he is demanding anyhow , and

B) if he insists it goes to court the only winners tend to be the lawyers!

 

She is wise to have taken legal advice, from a qualified lawyer (which I'm not), who hopefully has a practising certificate (I haven't!), and professional indemnity insurance (which I don't). Moral : rely on professional legal advice, not my uninsured "best guess"!

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Many thanks for the informed (uninsured or otherwise!) and detailed reply, BazzaS. I'll try as best I can to answer the questions you've put to me...

 

You say "both their names are on both the mortgage and the deed" : is there actually a deed (unregistered land) or is there an entry on the Register at the Land Registry (registered land)?

 

In reply to this question, my friend said "yes, there is a deed, but our mortgage lender retains possession of it until the loan has been paid off". At least, she thinks that's the situation. Does that answer the question? She has a "deed of covenant" which has both her and her ex partner's names on it. She has a letter from the original solicitors who dealt with the sale, which was received upon completion which says "the title deeds will be sent to your bank to be retained until your mortgage has been repaid in full. I am attending to the registration of your title at HM land registry." That letter is also addressed to both her and her ex partner. The property is leasehold.

 

Is one of these alternatives a more "standard" arrangement than the other? For completeness, the property in question is a flat in a modern apartment building (constructed in the last 10 years). Does that shed any light on the situation at all?

 

For the purpose of what follows : did the purchase happen after 1996 ?

 

After.

 

You also say "My friend has sought legal advice which clarified the official legal position as being that both her and her ex are joint stakeholders in the property" : in which case do you mean that they are "joint tenants of the equitable interest" rather than "tenants in common "?

 

This is where things get a bit tricky for the legally uninitiated. She's not sure, is the simplest answer.The solicitor in question asked a series of searching questions, and then on the basis of the answers, offered the advice previously stated. She has all the documentation to hand - is there a place she can look to determine the answer to the question? What I can tell you is that no agreement was drawn up prior to purchase of the property to describe in any way whatsoever how ownership of the property was to be divided in the event of sale.

 

If registered : what does the entry on the register at the land registry say (in particular if there are any restrictions in the register that might suggest the ORIGINAL status of the equitable interest was a tenancy in common ).

 

Given there's reference in the documentation from the original solicitor who dealt with their purchase about making such an entry in HM land registry, can we assume it's registered? If so, how does one go about discovering the contents of such an entry? Is this something my friend should have received a copy of, after the entry was made?

 

In the end if he is being really stubborn, and they can't agree, she may have to go to court under S14 of the Trusts of Land and Appointment of Trustees Act 1996, where the court will decide (following S15) if the property should be sold, and who gets what share (the court issuing a "property adjustment order" if need be).

 

Has she suggested to him he take some initial legal advice, and then he might come to some agreement , if he knows

A) he won't get what he is demanding anyhow , and

B) if he insists it goes to court the only winners tend to be the lawyers!

 

One can only hope! From the sounds of the advice she has received, reaching an agreement between themselves would be vastly preferable to a costly court proceeding, out of which he wouldn't just not get his original deposit, but in all likelihood, nothing at all.

 

She is wise to have taken legal advice, from a qualified lawyer (which I'm not), who hopefully has a practising certificate (I haven't!), and professional indemnity insurance (which I don't). Moral : rely on professional legal advice, not my uninsured "best guess"!

 

Point taken and understood :) Still, advice from someone with such obviously detailed knowledge, however anecdotal the source, is invaluable! Thanks again.

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Many thanks for the informed (uninsured or otherwise!) and detailed reply, BazzaS. I'll try as best I can to answer the questions you've put to me...

 

 

 

In reply to this question, my friend said "yes, there is a deed, but our mortgage lender retains possession of it until the loan has been paid off". At least, she thinks that's the situation. Does that answer the question? She has a "deed of covenant" which has both her and her ex partner's names on it. She has a letter from the original solicitors who dealt with the sale, which was received upon completion which says "the title deeds will be sent to your bank to be retained until your mortgage has been repaid in full. I am attending to the registration of your title at HM land registry." That letter is also addressed to both her and her ex partner. The property is leasehold.

 

Is one of these alternatives a more "standard" arrangement than the other? For completeness, the property in question is a flat in a modern apartment building (constructed in the last 10 years). Does that shed any light on the situation at all?

 

 

 

After.

 

 

 

This is where things get a bit tricky for the legally uninitiated. She's not sure, is the simplest answer.The solicitor in question asked a series of searching questions, and then on the basis of the answers, offered the advice previously stated. She has all the documentation to hand - is there a place she can look to determine the answer to the question? What I can tell you is that no agreement was drawn up prior to purchase of the property to describe in any way whatsoever how ownership of the property was to be divided in the event of sale.

 

 

 

Given there's reference in the documentation from the original solicitor who dealt with their purchase about making such an entry in HM land registry, can we assume it's registered? If so, how does one go about discovering the contents of such an entry? Is this something my friend should have received a copy of, after the entry was made?

 

 

 

One can only hope! From the sounds of the advice she has received, reaching an agreement between themselves would be vastly preferable to a costly court proceeding, out of which he wouldn't just not get his original deposit, but in all likelihood, nothing at all.

 

 

 

Point taken and understood :) Still, advice from someone with such obviously detailed knowledge, however anecdotal the source, is invaluable! Thanks again.

 

Easiest of your responses to deal with (and hopefully most productive) is the registered vs unregistered land issue .

 

It sounds like it is registered :

"Given there's reference in the documentation from the original solicitor who dealt with their purchase about making such an entry in HM land registry, can we assume it's registered? If so, how does one go about discovering the contents of such an entry?"

 

http://www.landregistry.gov.uk/public/property-ownership

 

If you google "land registry" ignore any commercial sites that offer to do searches : go for the .gov.uk land registry site.

£3 for a copy of the entry for any property (searchable by postcode)

 

It'll give you the entries for the property register, proprietorship register, and charges register : not an "official copy" that might be needed for any court submission, but good enough to inform the current situation!

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I don't think the point he is making about the deposit has any merit. A deposit is quite clearly part of the house purchase price not some sort of loan.

 

I imagine the solicitor advised the property was held as a joint tenancy which would lead to a 50/50 share on sale regardless of the respective contributions. If it is held as a tenancy in common a note to this effect appears on the register. A decision should have been made on this by your friend in the context of the land registration forms when the property was acquired.

 

Your friend should read http://www.bailii.org/uk/cases/UKSC/2011/53.html which is self-explanatory. Where the parties change their original intention, they will be entitled to a fair share of the property. In deciding what is fair, the court will take account of the parties' whole course of dealing in relation to the property. Similar factors are taken into account as those that are considered when ascertaining the parties' actual intentions.

 

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 ascertain by direct evidence or by inference what their actual intention was as to the shares in which they would own their property, each is entitled to a fair share. In deciding what is fair, the court will take account of the parties' whole course of dealing in relation to the property. I am therefore sceptical about the advice your friend has received that everything would be split 50/50. No doubt this would have been true 20 years ago but I don't think that is supported by today's case law.

 

 

An order for sale should be no problem, difficult to see how he could resist that.

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I only have time to write a quick response right now, but I've advised my friend to obtain copies of land registry entries, which she is now doing. Also, thanks very much to everyone for the on-going advice!

 

Rexroth/steampowered: you both make mention of an order to sell/order for sale. Under those circumstances, what happens to the equity released from sale in lieu of an agreement between the parties on how it's divided? Does the bank hold on to it? The solicitor handling the sale? Or do they both just receive a cheque in the post for half (assuming joint tenancy of the equitable interest)?

 

EDIT: Chaps, she has the land registry entry - apparently these things are delivered by PDF these days. I've had a look at it, and nowhere does the word "common" appear. Can someone point me at the section i should be looking at, or the wording i should be looking for, in order to determine whether we're in "joint tenancy of equitable interest" or "tenants in common" territory? Many thanks!

Edited by Jeff255
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The point about getting an order for sale is that it brings the matter to an end. Your friend has been paying the mortgage for some years and whatever the legal fees are it is going to settle the matter. The distribution of the proceeds of sale will be settled at the same time.

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The point about getting an order for sale is that it brings the matter to an end. Your friend has been paying the mortgage for some years and whatever the legal fees are it is going to settle the matter. The distribution of the proceeds of sale will be settled at the same time.

 

Very true. I'm just curious though, as to what happens in the event that the matter is still being "settled" when the sale goes through and said proceeds are sitting somewhere waiting to be distributed? I guess I'm just trying to be clear about the process, under those circumstances. Many thanks for your continued advice/time, specially on a Friday night :)

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The court would presumably decide what should happen to the equity and how legal costs should be dealt with as part of the order for sale. If there is a dispute which can't be resolved in time one possibility would be for the money to be paid into court pending a resolution (although this would need a court order).

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