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JGM
JGM, Solicitor
Category: Scots Law
Satisfied Customers: 11150
Experience:  30 years as a practising solicitor.
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I have a declaration of trust that has been prepared by my

Customer Question

I have a declaration of trust that has been prepared by my conveyancing solicitor. However I’m not comfortable with the wording and I wanted to have it re-written before I sign the document. The situation is as follows. I have purchased a house with my
girlfriend, I have contributed a large deposit (£52,000) towards the purchase price (£208,000), and my girlfriend is unable to contribute to the deposit. However we will be paying the bills equally and we are going to own the property as tenants in common
with unequal shares. (Myself 62.5% my girlfriend 37.5%) I want to ensure that in the unfortunate event of a breakup I will receive my deposit back as a percentage of the property (25% based on the £52,000 of the purchase price of £208,000). I am concerned
that the wording of my declaration of trust my mean I only receive 25% of the equity in the house when sold. So for example if we sold the property immediately for the same price we purchased it for I may only receive (25% of the £52,000 equity in the property,
which equates to £13,000) The remaining equity after the first 25% share is to be divided equally between myself and my girlfriend. So I may put £52,000 down as a deposit but only walk away with £13,000 (25% equity) +£ 19500 (half remaining equity) = £32500
I want a declaration of trust which is fair and ensures I receive 25% of the sale price back before the remaining equity is shared. So for example if the property sells in 10 years for £416,000 I would receive 25% or £104,000 before the remaining equity is
divided.
Submitted: 1 year ago.
Category: Scots Law
Expert:  JGM replied 1 year ago.
The deed says that you get the greater of £52000 OR 25% of the free sale proceeds and the balance is divided equally.
So the minimum you would get is £52000 under any circumstances. If 25% turns out to be greater than £52000 then you get that figure before any equal division. There seems to be nothing wrong with the Deed of Declaration of Trust. It does what you want to it to.
I hope that helps.
Customer: replied 1 year ago.
Thanks does the term 'net proceeds' meana) the sale price of the property (e.g £208,000)
or
b) the equity made in the property (e.g £52,000)Based on the first 25% would this be £52,000 or £13,000 if sold immediately for same as the purchased price?Thanks alan
Expert:  JGM replied 1 year ago.
Net proceeds is the profit after repayment of the mortgage and payment of sale costs. In other words Anyway, my comment to that effect broke the ice and calmed my own nerves! Arehat is left over to be divided.
If sold immediately after purchase you would get the first £52000.
I say again the agreement says you get WHICHEVER IS THE GREATER OF
£52000
Or
25%
Customer: replied 1 year ago.
My concern is that if the house price increases my initial share of £52,000 or 25% does not.Could it be worded so that the 25% is of the sale price of the house? Not of the net proceeds.So for example if the house sold in 10 years for double (£416,000) the declaration would state that I would receive 25% of the sale price?thanks alan
Expert:  JGM replied 1 year ago.
You can agree anything you like. There would have to be sufficient proceeds to repay the mortgage in full of course but thereafter there is no difficulty in specifying that you get 25% of the sale price and the rest is split between you equally.
Customer: replied 1 year ago.
Can you help we reword my declaration of trust. My current version is as follows:3. It is hereby agreed that the Property shall be held as Tenants in Common and upon a future sale of the Property the net proceeds of such shall be distributed as follows:-(a) The first £52,000.00 or 25% of the gross Sale price which ever is the greater to the said ALAN ***** *****(b) the remainder to be divided equally between ALAN ***** *****
and CHARLIE ELIZABETH MILLINGTONhowever my mortgage appointed solicitor will not accept this as her response was as follows:I note your comments however I am unable to refer to gross sale price as this wouldn’t take into consideration the reduction of legal fees, agents fee and mortgage redemption etc. It has to be referred to as Net sale proceeds.kind regardsAlan
Expert:  JGM replied 1 year ago.
You would be better to word it as you get the greater of £52000 or 25% of the net free proceeds with any remainder being divided equally. Where there is a mortgage that has to be repaid first and foremost.
JGM and other Scots Law Specialists are ready to help you
Customer: replied 1 year ago.
I have started a new question following on from your advice, can you review this so i can pay for your response. thanks alan
Expert:  JGM replied 1 year ago.
Will do.