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Joshua
Joshua, Lawyer
Category: UK Family Law
Satisfied Customers: 25358
Experience:  LL.B (Hons), Higher Prof. Dip. Law & Practice
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I co-own a house with someone 50/50, he put in more equity

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I co-own a house with someone 50/50, he put in more equity but also has more debts. If we sell the house, is the profit split 50/50 or by equity? Who is responsible for the debts?

Joshua :

Thanks for your question. Please kindly RATE my answer when you are satisfied

Joshua :

Is the debt you refer to just in his sole name please and not yours jointly?

Joshua :

Did you enter into any form of specific declaration of trust deed when or after you bought?

Customer:

The debt we both signed for is 38K. but part of his 78K. All else is individual - I owe 45K to my bank.

Customer:

I am unsure what 'trust deed' means.

Joshua :

Thanks. With your permission I will deal with the debt first and equity separately as the debt issue is relatively straightforward.

Customer:

OK. Thank you.

Joshua :

In terms of debt the mortgage as you will know is secured against the property and the mortgage lender is entitled to the repayment of debt before either of you are entitled to any equity. In terms of unsecured debt you are not liable for any debt just in your partners sole name - the same is true vice versa. You are jointly and severally liable for the debt in your joint names which means the lender can pursue either or both of you as they please though in practice they would pursue both of you for the same.

Joshua :

Do you have any questions on the above before i more on to the equity aspect?

Customer:

Yes, I understand.

Joshua :

Thanks. As your partner is a joint owner of your property unless he has evidence that you entered in to a declaration of trust or other evidence to the contrary, the recent decision in the case of Kernott makes it quite clear the starting point for ownership is 50% / 50% in terms of shares in the property. However this can be shifted if he can show by reference to financial evidence that he has contributed more to the property and that there was no intention on his part to make a gift of such contributions to you.

Joshua :

If you were unable to agree as to how to divide the property then ultimately you or he have a a right to apply to the courts for an order for sale under the Trusts of Land and Appointment of Trustees Act and / or to determine your respective shares in the property. The courts have the power to impose a settlement based on what they believe is fair based on the evidence you can both bring.

Joshua :

It is not easy for your partner to rebut the presumption that his additional equity was not a gift if he has no agreement signed by you both that evidences this. As with any litigation the outcome is necessarily uncertain but if he can show by reference to evidence the above then he may have the basis of a successful claim to shift the percentage in his favour. The case of Stack v Dowden which would be a useful read as well as the very recent case of Kernott. The burden of proof that is required is relatively high.

Customer:

So, because he can show that he put more in, he can claim to be owed more if we sell. Then I can decide to go to court and, no doubt through a lengthy procedure that involves the divulging of many (private) issues of money, the courts decide?

Customer:

I just read the 3rd paragraph. So, it is actually 50/50 but if he chooses to fight that rule, he can, provided he can show that he put more in but, again, I can fight that in court?

Joshua :

He could try to claim as such but subject as above there is a presumption that any such monies he put into the property above 50% were gifts to you. It is up to him to rebut this presumption. The sort of evidence he would need to show is that you did not share any financial accounts or products (which from what you say is not the case) or documentary evidence showing at the time he did not intend to make such gifts to you - e.g. instructions to solicitor or correspondence exchanges between you. It is not an easy task.

Joshua :

Is there anything above I can clarify for you?

Customer:

Thank you. Yes, just one question, you mentioned 'contribution' - in law, does it only matter what someone paid when the house was bought (and then that determines 50/50) or are other financial contributions taken into consideration. I just found the Kernott case - it had to go to Supreme Ct.

Customer:

Other contributions I mean, who paid the mortgage monthly and/or any other household monies.

Joshua :

Both the original equity contribution to the property and capital contributions towards the property after purchase (i.e. capital repayments (not interest) to mortgage or renovations carried out but not outgoings like electric etc) will count but such contributions will be presumed to be gifts to the other so as to keep the 50/50 split intact unless the party wishing to claim a greater share can rebut this presumption as above.

Joshua :

Is there anything above I can clarify for you any further?

Customer:

Thank you. If this is a legal case I want to take forward, what kind of lawyer should I employ? Is it Property Law?

Joshua :

Property lawyers sometime have experience but it is normally a specialism more common amongst family lawyer. You need to ask for a lawyer who specialises in TLATA claims (Trusts of Land and Appointment of Trustees Act)> Most firms of reasonable size would have at least one person that has experience of such matters. Don't use someone who has not had some decent experience under their belt because they will be feeling their way which is no use to you.

Joshua :

Does the above answer all your questions or is there anything I can clarify or help with any further?

Customer:

This is good, thank you for your answers.

Joshua :

A pleasure. If you have no further questions for now I should be very grateful if you would kindly take a moment to rate my service to you today. Your feedback is important to me. If there is anything else I can help with though please reply back to me though.

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