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Joshua
Joshua, Lawyer
Category: Law
Satisfied Customers: 25358
Experience:  LL.B (Hons), Higher Prof. Dip. Law & Practice
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Hello, I am a co-owner of a house which was bought in may

Resolved Question:

Hello,
I am a co-owner of a house which was bought in may 2010 for £235K. Owner No1 payed £75K towards mortgage and mortgage payments since then. Owner No2 payed motgage payments only. The outstanding mortgage on the house is £130K. The house deeds say 1% of the house belongs to owner No1 and 99% to owner No2. What are the owners legally entiteled to if owner No2 wants to pay off the owner No1.

regards
VB
Submitted: 3 years ago.
Category: Law
Expert:  Joshua replied 3 years ago.

Joshua :

Hello and thank you for your question. I will be very pleased to assist you. I'm a practicing lawyer in England with over 10 years experience.

Joshua :

May I enquire how the deeds came to provide a 1% 99% split in 2's favour when 1 paid far more than 2 has for the property please? Was this intended on 1's part?

Joshua :

Is the mortgage interest only or capital repayment please?

Customer:

the deeds provision was the intension of 1's part.

Customer:

mortgage repayments are capital repayments. The mortgage in 2010 was £160K. We payed off in equal proportions £30K

Joshua :

Thanks. So in other words 1 intended to effectively make a gift of most of the capital deposit he paid towards the house to 2?

Customer:

Looks like it. But 2 is quite happy to pay 1 £75k of deposit +£15K 3 years mortgage payments.

Joshua :

Thank you. Finally are 1 and 2 not able to agree about how to deal with the property going forward? For my information are you (interested) from 1 or 2's perspective?

Customer:

The problem at the moment is the value of the house as 1 had valuations from estate agents which vary and 2 doesnt have enough money to pay £12.5K on the top of £90K

Customer:

i am from 2's perspective

Joshua :

Thanks. If there is a declaration of trust or a record on the transfer deed that provides for a 1/99 split in 1's favour and this is accepted as the intention of the parties by 1 then this will be binding on the parties and each will own the percentage share alloted to them.

Joshua :

They are free to come to any other arrangement the wish between them - i.e. they are not restricted to those shares absolutely but 2 is entitled to hold 1 to the same.

Customer:

We had an offer on the house in Dec 2013 of £250K

Customer:

and 1 was asking £98K, today, as the house prices are rising the asking figure went up to £102.5k

Joshua :

If either 1 or 2 wish to realise their share then they can require the other to a) buy out their share or b) require that the house is sold to realise their share.

Joshua :

May I clarify is 1 wanting to sell or otherwise deal with the property? If so is 2 able to obtain a mortgage in their sole name for the amount required to cover the existing mortage?

Customer:

are you saying if the house is sold for lets say £260K, 2 is legally entiteled to 99% of the difference between the house equity and the bying price?

Joshua :

May I clarify is 1 wanting to sell or otherwise deal with the property? If so is 2 able to obtain a mortgage in their sole name for the amount required to cover the existing mortage?


Customer:

1 is wanting to sell and move on. 2 can have the mortgage in their sole name but is straggeling to pay 1 off

Joshua :

Thanks

Joshua :

based upon what you say, one is entitled to one percent of the net equity of the property; in other words, one percent of the net proceeds of sale after deducting the mortgage and costs of sale such as solicitors fees and estate agents costs and so

Joshua :

accordingly, one is only entitled to a very small percentage of the net sale price. The main issue will be therefore 2 obtaining a mortgage in their own name.

Customer:

Thank you, XXXXX XXXXX I got my answer:)

Joshua :

How much is left on the mortgage roughly?

Customer:

£130K

Joshua :

Thanks. So If the property is worth £260K - £130K - hypothetical £4K sale costs (agents, legal fees etc) net equity is approximately £126K

Joshua :

Accordingly 1's share is roughly £1026.

Joshua :

2 would need to find a mortgage lender willing to lend them in their sole name an amount sufficient to enable the existing mortgage to be paid off. Providing 2 can do this, two should be able to buy out 1's share for circa £1000 or thereabouts.

Customer:

but I am quite happy to pay 1 £90K he invested. 126-90=36K 1's share £360

Customer:

makes £90360

Joshua :

That is of course your perogative. But you do not have to. You can pay 1 any sum over and above the 1% share he is entitled to such as you are willing to agree, but this is entirely for you to decide.

Customer:

he wants the half of 260-235=25/2=12.5 + 90 = 102.5

Customer:

Ok, I got it:)

Joshua :

Thanks. So the solution here is presumably to start on the basis that he is entitled to one percent as discussed above. From there, you are free to offer a higher figure such as you are willing to pay on a " without liability" basis such as you can afford.

Joshua :

There is little point in my mind to you offering a figure which makes the proposal unaffordable from your point of view. If you are happy in principle to pay more than you are required then you may consider offering a sum which is more than 1% but is not more than you can afford and reminding 1 that he is only actually entitled to 1% and is very lucky that you are offering any more at all.

Customer:

I am a bit worried that he won't move if he doesn't get enough money...

Joshua :

whilst ideally, you would be able to agree between you how to proceed, ultimately if you are not able to reach agreement, you can apply to the courts for an order that either he buys out your share or you buy out his or that the property is sold as you prefer. He cannot ultimately hold you to ransom. Ideally, court proceedings would be avoided however it is possible to make clear to 1 that if you cannot reach agreement between you, reminding him that you are offering far more than he is entitled to as a gesture of goodwill, you can apply to the courts for an order in respect of the property as above.

Joshua :

strictly from a financial point of view, this could be well worthwhile as based upon what you say, you need not pay more than 1% of the net equity in the property to remove him from the title.

Joshua :

Is there anything above I can clarify for you?

Customer:

Thank you Joshua, I got my answer and I feel a bit better now.

Customer:

Have a good weekend:)

Joshua :

And you. If I can assist any further as the situation develops please do not hesitate to revert to me

Customer:

ok, I will. Thanks again:)

Joshua :

If you have no further questions for now I should be very grateful if you would kindly take a moment to rate my service to you today. Your feedback is important to me. If there is anything else I can help with please reply back to me though.

Joshua, Lawyer
Category: Law
Satisfied Customers: 25358
Experience: LL.B (Hons), Higher Prof. Dip. Law & Practice
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