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Thomas
Thomas, Lawyer
Category: UK Property Law
Satisfied Customers: 6376
Experience:  BA (Hons), PgDip, Practising Solicitor
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My mother has lent 40% of equity into my brothers house, we

Customer Question

My mother has lent 40% of equity into my brothers house, we have a basic loan agreement set out. But now my brother is planning to get married. How can we secure mum's 35% equity in the house, in case there was a divorce in the future? Therefore to portect her interest, to make it secure.
Submitted: 3 years ago.
Category: UK Property Law
Expert:  Thomas replied 3 years ago.
Hi

Thanks for your question.

If your mother is not registered on the legal title to the property but has contributed a sum of money to finance the purchase and now wishes to protect this then you will need to see a local solicitor about executing a declaration of trust.

This is a deed sworn by both your mother and brother in which they specify how the proceeds of sale of the property (ie. when it is eventually sold) are to be divided. It effectively states that your brother is the legal owner of the property but your mother retains an interest in it, which your brother acknowledges. This could take account the situation by either specifying that your mother receive the amount outstanding on the loan first and then the remaining amount is to pass to your brother or it could simply stated that your brother is to receive x% from the proceeds of sale and your mothers shall receive receives y%.

The declaration can then be registered as a restriction or a notice against the registered legal title to the property that you are buying.

Divorce proceedings would be subject to the declaration of trust, which means that your brother’s wife would not be able to claim your mother’s interest should be included in the matrimonial asset pool over which financial settlement is sought.

If this is useful please kindly click accept so that I may be rewarded for my time. It will be gratefully received and you will be free to ask follow up questions.

Kind regards,


Tom

Thomas, Lawyer
Category: UK Property Law
Satisfied Customers: 6376
Experience: BA (Hons), PgDip, Practising Solicitor
Thomas and other UK Property Law Specialists are ready to help you
Customer: replied 3 years ago.
Would executing a declaration of trust cover my mother's interest on it's own or should we also ensure a loan agreement is in place with a charge on the property? 30% has been lent by bank, therefore the 1st charge would be the bank and 2nd would would be my mothers on any sale.

If something was to happen to my brother, would the above points still protect my mothers interests after he is married. He is getting married in a 2 weeks, he has been divorced before so been through all the misery before. How much would declaration of trust cost?

In the declaration of trust can we mention that at 50% of the 40% lent needs to be paid off within the next 3 years, therefore releasing capital for my mother to use.

Also, how can we protect my mothers interest if something was to happen to my mother?
Expert:  Thomas replied 3 years ago.
Hi,

If your mother were to ask for a charge on the property then this would be an alternative to a declaration of trust but you would need the lender's consent for this. It would prevent the sale of the property but presumably your mother is confident your brother would not defraud her.

You can mention the terms of repayment in DOT and it would only cost around £100-150+vat depending on how complex the drafting becomes.

A declaration of trust would protect your mother assuming the it is accpeted that it is genuine and not an attempt by your brother to dilute his assets but you have proof of the transfer of funds to finance it by your mother and the loan agreement as evidence of this.

Kind regards,

Tom
Customer: replied 3 years ago.
Thanks, XXXXX XXXXX quick response.

We need to remember the property is solely in my brothers name currently. Once my brother gets married, can we declare his wife name into the DOT if she agrees, therefore they are both accountable for my mothers loan for the property and have responsibility on payments?
Expert:  Thomas replied 3 years ago.
Hi

If she is not an interested party then there would be no poont in includong her.

She could only be added to the loan if she consents and there seems little reason why one would consent.

Tom
Customer: replied 3 years ago.
If my brothers wife is consenting to be added the loan agreement before legal marriage, can we add her before they get married in two weeks and do a DOT between both of them and my mother? Even though property is ONLY in my brothers name?

Or is it best to just keep everything between my brother and my mum?
Customer: replied 3 years ago.
Last reply is what my brother is suggesting, but is that legal to do, if property is only in his name. To clarify.
Expert:  Thomas replied 3 years ago.
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Customer: replied 3 years ago.
Would you recommend a will to be set up ASAP if anything was to happen to my mother, as currently my mother does not have one.
Expert:  Thomas replied 3 years ago.
This is probably a separate, unrelated question really.

Is she still married?

Tom
Customer: replied 3 years ago.
No, my mother is a widow, my father pasted away 2 years ago.
Expert:  Thomas replied 3 years ago.
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Customer: replied 3 years ago.
"The declaration can then be registered as a restriction or a notice against the registered legal title to the property", would the above statement lead to notifying the bank lender or land registry?
Expert:  Thomas replied 3 years ago.
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Customer: replied 3 years ago.
Can a document of trust be drawn up by ourselves? Is there any standard templates available on the net?
Expert:  Thomas replied 3 years ago.
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Customer: replied 3 years ago.
If my brother fills out a AN1 below, will this help my mother protect her interests?

http://www.landreg.gov.uk/upload/documents/AN1.pdf

https://legal365.secureclient.co.uk/legal365/index.cfm?event=base:product&productId=7353%20&collection=2

Expert:  Thomas replied 3 years ago.
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