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Making a property agreement enforceable

including wills and probate
Thackley
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Re: Making a property agreement enforceable

#256668

Postby Thackley » October 8th, 2019, 8:39 pm

Clitheroekid wrote:Thanks for the further explanation. However, although you made it clear that you were not seeking advice on what to do about the property the more I read your post the more convinced I became that the only sensible solution is to sell it.

Although, as I said in my previous post, it's technically possible to enter into a contract with M in the terms set out I would foresee considerable problems. For a start, M would need to be separately represented - one solicitor could not possibly act for both B and M due to the conflict of interest. This would mean that she would be advised of the inherent problems in this type of agreement, not least that she is effectively unable to buy any other property while she's tied into this one.

She would also be advised that she would be legally obliged to tell the mortgage lender that she had permanently vacated the property, which could cause problems for B.

If you were planning to rent the property out there would be tax issues for M, as the rent received would, on the face of it, be 50% hers. Although you could get round this she would have to satisfy HMRC that she had no entitlement to it, which is yet more hassle.

There are also potential insurance issues that would need to be addressed if she’s no longer going to be living in the property.

All things considered, the likelihood is that she would be advised not to agree to the proposal.

Even if she insisted that she was happy to proceed, such comprehensive advice won’t be cheap. As the proposed cash sweetener isn't going to be a substantial amount B would probably also have to agree to pay M's legal fees, otherwise they'd probably absorb too large a chunk of the sweetener.

You say that a sale would be "unlikely to yield much, if anything, in the way of gain". However, depending on where the property is and the strong possibility of a post-Brexit decline in value, particularly if it's in London or the south east, it may well be better to get out now on a neutral basis than in a year’s time at a loss. Admittedly, this is purely a matter of opinion as to how the market will move, but it's a factor to be considered.

Taking everything into account it's difficult to see any argument for not selling. Is there a particular reason why B wants to retain ownership?


Thank you for your very clear and well-reasoned answer. I was aware that the type of agreement I had in mind would impact M's ability to buy another property. I even thought that in the interests of fairness I should make M aware of this.

My thinking, possibly naive, was to get a suitable document drafted and then to put it to B and M to sign, leaving it up to M as to whether or not she sought her own legal advice about it. My suspicion is that she would not seek such advice purely on cost grounds.

I hasten to add that my intentions are not about cynically exploiting M's lack of awareness but about trying to develop a solution that is fair to both B and M and gets them to something that is workable for both of them. I would be happy to set out for both B and M the issues you raise about insurance, taxes and mortgage conditions. I accept that a legal adviser acting on M's behalf would probably nuance these issues differently to the way I might present them.

If we go for a sale and forget my ideas about an agreement M will not get any cash until any sale is completed. The amount of cash may well be very little compared to what she is currently looking for. I suspect M is wanting her money as she leaves in a few weeks time. As to B, retaining the property would solve a problem of where to live when she returns to the UK. For both B and M it also solves a problem of what to do about the current contents of a 2 bed property, contents which neither currently have anywhere to home.

Your post has given me cause to stop and think long and hard about what I'm doing and, perhaps more importantly, why I'm doing it. For that you have my sincere thanks.

Chrysalis wrote:It’s a cautionary tale for sure. What would you do differently with the benefit of hindsight? (Genuine question.I think many of us can imagine ending up in a similar situation).


Rather than giving B quite a substantial lump of cash to facilitate the property purchase, I would delay doing that and advise renting together instead. The cracks that showed up in their relationship and ultimately ended it, would then have emerged earlier, no property would have been bought and the present mess would never have arisen. The road to hell...

MyNameIsUrl
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Re: Making a property agreement enforceable

#256747

Postby MyNameIsUrl » October 9th, 2019, 11:15 am

Thackley wrote:If we go for a sale and forget my ideas about an agreement M will not get any cash until any sale is completed. The amount of cash may well be very little compared to what she is currently looking for.

From what you said earlier I've inferred that B is expecting to receive a much bigger amount than M, reflecting a refund of the deposit. But - as I mentioned in a previous reply - won't the solicitor acting for them as vendors expect to split the proceeds to their two respective bank accounts 50:50? (My own solicitor was very wary of sending funds to an account in my name only when a property was in joint names.) Or is this a red herring and the solicitor will send it where you ask? You hint that M is expecting 'more' and I'm imagining potential for problems here.
Thackley wrote:
Chrysalis wrote:It’s a cautionary tale for sure. What would you do differently with the benefit of hindsight? (Genuine question.I think many of us can imagine ending up in a similar situation).


Rather than giving B quite a substantial lump of cash to facilitate the property purchase, I would delay doing that and advise renting together instead. The cracks that showed up in their relationship and ultimately ended it, would then have emerged earlier, no property would have been bought and the present mess would never have arisen. The road to hell...

Rather than 'giving' B the cash, would a loan (with a simple document) have helped? (I too can imagine being in a similar situation.)

Clitheroekid
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Re: Making a property agreement enforceable

#256758

Postby Clitheroekid » October 9th, 2019, 12:03 pm

MyNameIsUrl wrote:But - as I mentioned in a previous reply - won't the solicitor acting for them as vendors expect to split the proceeds to their two respective bank accounts 50:50? (My own solicitor was very wary of sending funds to an account in my name only when a property was in joint names.)

This is a common situation, and is very easily resolved by the two co-vendors signing an authority to the solicitor to pay them the net proceeds as agreed between them.

Thackley
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Re: Making a property agreement enforceable

#256824

Postby Thackley » October 9th, 2019, 7:05 pm

MyNameIsUrl wrote:
Thackley wrote:
Chrysalis wrote:It’s a cautionary tale for sure. What would you do differently with the benefit of hindsight? (Genuine question.I think many of us can imagine ending up in a similar situation).


Rather than giving B quite a substantial lump of cash to facilitate the property purchase, I would delay doing that and advise renting together instead. The cracks that showed up in their relationship and ultimately ended it, would then have emerged earlier, no property would have been bought and the present mess would never have arisen. The road to hell...

Rather than 'giving' B the cash, would a loan (with a simple document) have helped? (I too can imagine being in a similar situation.)


Not really. B and M had never previously lived together. Had they rented somewhere together as their initial experience of living together, then they would probably have broken up just the same. Jointly purchasing a property together and then breaking up has left much more clearing up to be done than would have resulted from renting and breaking up. B's contribution to the joint purchase was the provision of around 40% of the purchase price in cash, and just over half of this came as a parental gift. M's contribution was the income to facilitate obtaining a mortgage (taken out in joint names) to fund the remaining 60%. Unless I'm missing something, I can't see any advantage to be gained by loaning B cash rather than gifting it. In fact, the solicitor acting on B and M's behalf in the purchase required declarations that the gift to B was unconditional and most definitely not a loan. It also required me and my wife as donors of the gift to jump through the hoops of the solicitor's "prove your identity" nonsense. I suspect the declaration was a requirement imposed by the mortgage lender.

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Re: Making a property agreement enforceable

#256837

Postby MyNameIsUrl » October 9th, 2019, 8:07 pm

Thackley wrote:Unless I'm missing something, I can't see any advantage to be gained by loaning B cash rather than gifting it.

Thackley, I'm not challenging what you say, I'm trying to improve my own weak knowledge as I am in a similar position to where you were 2 or 3 years ago.
Following the sale, the various parties may have conflicting views on their own entitlements. ClitheroeKid explains clearly "[this] is very easily resolved by the two co-vendors signing an authority to the solicitor to pay them the net proceeds as agreed between them" but in practice the agreement might be the problem if the two parties have different perspectives. If in your case B could show that the loan amount (ie the deposit) needs to be repaid from the sale proceeds, it rather restricts M's view about how much of the remainder they are entitled to.
Thackley wrote:In fact, the solicitor acting on B and M's behalf in the purchase required declarations that the gift to B was unconditional and most definitely not a loan.

My guess here is that if it were a loan, the solicitor would have arranged a second charge on the property for you to give a better chance of you getting your money following the sale.

Just to reiterate, I am sorry to hear of your predicament, but I am trying to learn from the many useful posts on this thread as your situation is directly relevant to me. I'm not querying things for the sake of it.

Thackley
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Re: Making a property agreement enforceable

#256981

Postby Thackley » October 10th, 2019, 5:14 pm

MyNameIsUrl wrote: I'm trying to improve my own weak knowledge as I am in a similar position to where you were 2 or 3 years ago.
Following the sale, the various parties may have conflicting views on their own entitlements. ClitheroeKid explains clearly "[this] is very easily resolved by the two co-vendors signing an authority to the solicitor to pay them the net proceeds as agreed between them" but in practice the agreement might be the problem if the two parties have different perspectives. If in your case B could show that the loan amount (ie the deposit) needs to be repaid from the sale proceeds, it rather restricts M's view about how much of the remainder they are entitled to.
Thackley wrote:In fact, the solicitor acting on B and M's behalf in the purchase required declarations that the gift to B was unconditional and most definitely not a loan.

My guess here is that if it were a loan, the solicitor would have arranged a second charge on the property for you to give a better chance of you getting your money following the sale.

Just to reiterate, I am sorry to hear of your predicament, but I am trying to learn from the many useful posts on this thread as your situation is directly relevant to me. I'm not querying things for the sake of it.


OK, I see where you are coming from. Here's some further stuff which might help.

The idea of a loan never entered my mind as a means of protecting B's interests if it all went south (as it did). Strictly, a loan backed by agreement and second charge would have protected my interests rather than B's. OK, I could have re-lent (or gifted) the money to B again after a sale but loaning rather gifting the money would rather have defeated the object of giving B responsibility for the money at the time of the original gift.

Instead, the intended protection mechanism was to have a Deed of Trust between B and M which would set out the division of sale proceeds when the property was sold. M accepted at the time, and fortunately still accepts, that B is entitled to return of her deposit if/when the property sells.

The Deed of Trust should have been executed at the same time the sale took place. Why "the deed was never done" can, IMHO, be laid in large part at the door of the front street (NE England terminology) solicitor who acted for B and M in the sale. Over a year after the sale completed, I paid my £3 to the LandReg and discovered, to my horror, that the property was still registered in the name of the sellers. The solicitor's explanation was she was waiting for B and M to get back to her with their thoughts on what should go into the Deed of Trust and instructions on how the property should be registered (joint tenants or tenants in common). I think the lack of follow-up by the solicitor to allow this state of affairs to persist was at best unprofessional and at worst negligent. By the time of my discovery, B and M's relationship was over and B did not really want to discuss the matter with M. B unilaterally instructed the solicitor to register the property and that instruction was acted on.

Reflecting on the experience, there is a balance to be drawn between letting individuals (in this case my daughter B) find their own way and make their own mistakes and applying control and influence in order to avoid such mistakes occurring. Couldn't care less vs interfering busybody is my characterisation of the extremes. I'm broadly happy with where I struck the balance.

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Re: Making a property agreement enforceable

#257522

Postby Peanutte » October 13th, 2019, 11:41 am

The amount of cash may well be very little compared to what she is currently looking for.


If M had not been living there and paying the mortgage, she would have been living somewhere else and paying rent. Possibly not a very different amount. So I can't see how she can expect a substantial sweetener if there is unlikely to be surplus funds following a sale. What would be left from the proceeds of sale? Enough to pay the mortgage penalty, the 40% deposit and the costs of selling? If there is anything left over, split it two ways.


(I was in a vaguely similar situation - two of my children and one friend bought together. One daughter put in £10k of savings and I put in £16.5k and they split the mortgage payments three ways. After about three years one daughter wanted to move on. They sold.)


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