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cityguru
cityguru, Solicitor
Category: Property Law
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Experience:  solicitor
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I co-own a buy-2-let freehold property with a friend. The

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I co-own a buy-2-let freehold property with a friend. The property is mortgaged in our joint names. He would now like to sell the property because he needs the funds for another project. Im not keen to currently sell.
I could potentially raise enough funds to buy his current share of equity. However, there is no way I would get a mortgage in my sole name (due to an IVA on my credit file). Is there any legally binding document (or deed of trust/contract) that we could sign which he (and his next of kin) would agree to not have any further or future demand on the equity (or ongoing rent) from the property in the event of a future sale if I agree to pay "buy him out" now?
Submitted: 11 months ago.
Category: Property Law
Expert:  Nicola-mod replied 11 months ago.
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Expert:  Nicola-mod replied 11 months ago.
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Customer: replied 11 months ago.
I can continue to wait for a few days.thanks
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Expert:  cityguru replied 10 months ago.

Hi - I am sorry you have not had an earlier answer on this. You can certainly do what you propose. You can enter into a deed of purchase form his that transfers the whole of the equity to you ad would be binding between you. You would need also to make sure there is a clear record that you no longer hold the property as "joint tenants" but as tenants in common and you have 100% beneficial ownership - this is important because if anything happened too you and the property remained in joint names your business partner might be able to name a claim to the property on your death. It is not difficult to document all of this and a solicitor can help you. The main issue is the mortgage. First your mortgage document will almost certainly require you to notify the lender off any change in beneficial ownership but more significantly they are unlikely to release your friend from his liability under the mortgage so he will still remain liable even if you buy him out. This is obviously a problem for him not for you but he may be unwilling to agree but if there is reasonable equity in the property there should be no risk of the mortgage not being repaid even if there is default and the lender forecloses. You can of course ask the lender to transfer the existing mortgage to your sole name - if the property is let and the income adequate to cover the mortgage interest they may agree. Most buy to let lenders rate the credit risk on the basis of the rental property being a standalone business and do not look to the credit of the borrower - it is not the same as an owner occupier mortgage where the lender depends on the owner to pay.

Customer: replied 10 months ago.
Thanks for the reply, I think that helps a lot.One point I should clarify is that the mortgage is a residential mortgage (not btl), we didnt change it when we moved out. With that in mind can you clarify the following point:Would/could a solicitor create the deed of purchase and change the tenancy arrangement (Is this done with a Land registry notification TR1?) without informing/involving the mortgage company? Or, would they be legally obliged to inform them?
(I think my friend would probably agree to me "buying him out" but leaving his name on the mortgage. That would suit me providing the deed of purchase etc can be put in place)Kind regards
Gary
Expert:  cityguru replied 10 months ago.

Hi It is possible to have a deed that is binding between you and your business partner without having to register it - but it is not ideal because the land registry is a clear public record. You will be in breach of the terms of the mortgage if it is an owner occupier one by not tellling the lender that it is now buy to let. No one is legally obliged to inform the lender except you but of course anything registered with the Land Registry will be notified to them.

you can create a deed without filing anything but it is not the ideal solution. you would need to rely on the deed if there is a dispute whereas if everything is transferred to your name and registered there is no dispute possible.

Expert:  cityguru replied 10 months ago.

Is there anything further I can do to assist or clarify?

cityguru, Solicitor
Category: Property Law
Satisfied Customers: 13329
Experience: solicitor
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