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Clare
Clare, Solicitor
Category: Law
Satisfied Customers: 33801
Experience:  I have been a solicitor in High Street Practice since 1985 with a wide general experience.
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I bought a house with a friend for £249,950 last year. I paid

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I bought a house with a friend for £249,950 last year. I paid £125,000 cash deposit. The other half was paid by my dad as a temporary loan because our mortgage was turned down and we were worried we'd lose the flat. It has taken a year to get another mortgage offered. My friend made interest free payments to my dad each month of £650 for the first 6 months, then £715 for the next 6. My father died at the end of January. The loan needs to be repaid. The mortgage is now agreed but we have to wait for grant of probate.

The flat is now worth £365,000. Given everything that has happened (5 failed mortgage attempts and my dad's death) living with my friend has become impossible. He says the loan was no different to a mortgage and he is entitled to 50% of the equity. What happens if we sell? Is that true?

As the situation was supposed to be temporary we hadn't agreed on the trust deed. We drew up a new one to deal with my dad's death, but my friend stalled signing it for 3 months. We are tenants in common in equal shares to reflect the fact that he was supposed to get a mortgage for 50% and make all the payments. But the property has risen in value by £110,000 and he has only paid around £7000 for it.

I have no idea what to do.
Submitted: 2 years ago.
Category: Law
Expert:  Clare replied 2 years ago.
Hi
Thank you for your question.
My name is Clare
I will do my best to help you but I need some further information first.
For clarity are you intending to sell the property immediately?
Clare
Customer: replied 2 years ago.

I would rather sell the property immediately. He doesn't want to sell. All of my money is invested in the place, and I would rather live on my own.

Expert:  Clare replied 2 years ago.
Hi
Is the mortgage now in place and has the money been paid?
Clare
Customer: replied 2 years ago.

A mortgage has been offered by a building society but has not yet gone through as there is a hold up with the grant of probate on my father's estate. The loan was given with a charge held against the property. It cannot be released without grant of probate.

Expert:  Clare replied 2 years ago.
Hi
Has he continued to make repayments?
Clare
Customer: replied 2 years ago.
Yes. Via my account, labelled 'rent' on my statement, which I then paid to my dad. My dad was uncomfortable lending to Niall, which is why he wanted all the payments to come from me. I then also made a single overpayment of £15,000, which my dad allowed and reduced from the amount repayable. After I paid this, on my father's probate, the outstanding amount £117,000 from the original loan is still something I owe. Which is why I can't accept that this is only Niall's share of the loan.
Expert:  Clare replied 2 years ago.
Hi
So in fact your father did not lend him the money at all - he lent it to you.
Who made the payment of £15,000
May I ask what the relationship between you and your friend is/was?
Clare
Customer: replied 2 years ago.

We were friends. The loan was officially to us both, and agreed with a legal document with a charge held at the land registry against the property. It was convenient to me to be able to live for free off money inherited from my grandparents, which is why Niall was to pay the specified payments. The terms were that it should be paid each month (£715), and a mortgage secured within the year, jointly by us both. The £15,000 was an overpayment made by me above the usual loan payments, which were made monthly. The mortgage has been offered, but we can't accept or sell the flat until my dad's probate has been granted. The mortgage is however mainly offered on evidence of Niall's salary as I am self-employed. At the time it was offered, I had a lot of money in my account, and I am not sure it would have been offered without it as Niall has adverse credit history, the extent of which we didn't fully realise at the outset.

Customer: replied 2 years ago.

Sorry, just looking at my first post I realise it's confusing. My original deposit was £110,000. Of the £139,950 loan I made an overpayment of £15,000. Niall made the payments to me for the loan and I paid them to my dad. That transaction was pretty direct. They came into my account and straight out. My dad didn't want to be seen to only be lending to Niall as it was always a favour to me not him. As it stands, however, selling now would give Niall a 50% share of the uplift in the property, which is around £115,000, meaning he would have made around £57,000 on an interest free loan from my dad.

Expert:  Clare replied 2 years ago.
Hi
What does the existing Trust deed actually say?
Clare
Customer: replied 2 years ago.

There isn't one agreed. We were making one that we agreed on when we first bought the property. But it made no allowances for what would happen to the equity from the interest free loan from my dad, so neither of us signed it. I tried to adjust it a few months in but Niall didn't agree, feeling that the loan was all his.

Expert:  Clare replied 2 years ago.
Hi
So at the moment there is no signed Trust Deed and the property was purchased using Capital from you and a loan to you both - is that correct?
Clare
Customer: replied 2 years ago.
Yes
Expert:  Clare replied 2 years ago.
Hi
That is very much to your advantage since clearly there was no common understanding between you as to what the position was or should be
Your argument could be that in fact all that your friend has paid towards is half of the debt - meaning that his contribution was 25% and that is how much he should receive from the equity
legally the way forward is to apply to the courts for an Order for sale under the Trusts of Land and appointment if Trustees Act and to ask the court to decide how the equity should be shared between you
It would be more cost effective for you and your friend to negotiate the matter using Mediation.
I hope that this is of assistance - please ask if you need further details
Clare
Clare, Solicitor
Category: Law
Satisfied Customers: 33801
Experience: I have been a solicitor in High Street Practice since 1985 with a wide general experience.
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