Q My wife and I have just bought our first property together. We both agree tenants in common is the way to go, but cannot work out the wording/equation for the legal document that allows for the “live” proportional representation that we believe will be fair (happy to be corrected).
My wife put £63,500 in cash towards the purchase, while I contributed £26,500. We have agreed that we will pay off the mortgage and pay for improvements and/or repairs on a 50/50 basis.
To my mind we need an equation that allows for a “live” proportional ownership of the house to be defined, ie presently my wife owns a far larger proportion of the property, but over time as the mortgage is paid off or improvements/repairs are paid for on a 50/50 basis that proportional ownership will very slowly change.
I’ve seen some answers to similar questions that say pay off the initial deposit and then split any remaining 50/50. To me this seems unfair to my wife as there seems no return on the initial investment in the form of her deposit. RH
A I’m a little worried that you are addressing this issue after you have bought your home. The time to draw up a “deed of trust” stating, among other things, the proportion of the property you own as tenants in common is during the conveyancing process and before being registered as joint owners of the property at the Land Registry.
So you might want to check back with your solicitor to see how ownership is split, because I suspect that if you haven’t already done the sums it will be 50/50. It may also be the case that you are not tenants in common after all, as it is more usual for married couples to own property as joint tenants.
If it turns out that all is not as you want it to be, you’ll need to get your solicitor to draw up a new deed of trust which reflects your uneven contributions. However, contrary to what you say, you don’t need a “floating deed”, which I assume is what you mean when you say “live” proportional ownership.
A floating deed, also called a “commensurate share deed” is appropriate for people who will be making unequal contributions to the property costs and/or contributing uneven amounts to the mortgage over time. But because, after making unequal contributions to the deposit, you will be splitting all outgoings relating to your home down the middle, a traditional deed of trust is sufficient.
You are right that a deed which sets out how much you get back on the sale of the property as fixed amounts would be unfair both to you and your wife because your cash investments in the property would not benefit from the increase in house prices. Instead, you can work out your percentage shares in the property. To do this you each add your cash deposit to half the initial mortgage loan, divide by the purchase price and multiply by 100. So if you bought a house for £300,000 with a mortgage of £210,000, you would own just under 44% of the property and your wife would own just over 56%.
You are wrong to think that the proportion of the house that your wife owns will slowly change as you pay off the mortgage and/or you make improvements to it. It would change if you were making uneven mortgage repayments on top of uneven cash contributions, but you’re not planning to. You are dividing everything 50/50 so your percentage shares do not change.