Silver Shared Ownership Protection

15/12/2017
Our Silver Shared Ownership Protection is a deed of trust for joint owners of a property who want to protect more than just their initial share of the deposit. While it addresses this matter, it also focuses on what mortgage repayments you make and what contributions you put towards repairs and renovations during your ownership.

It contains the standard terms found in the Basic Deed of Trust, plus the additional clauses to reflect changes in contribution to the property - read our FAQs at the bottom of this article.

It is recommended for joint owners who are:

  • Married couples or civil partners
  • Family members
  • Unmarried couples (already living together)
  • Unmarried couples (not presently living together but intending to)

The Silver Deed is NOT recommended for joint owners who are:

  • Friends

We can help you draft a deed of trust and will explain can be protected in the deed. For help call 0333 344 3234 or click the link below to get a quote.

Get a Silver Deed of Trust *
* Fixed Fee – Trusts to Suit Your Circumstances – Fast Turnaround (deeds issued within 1 to 3 days after instruction)

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The Silver Shared Ownership Protection is a legal document that factors in future changes such as:

  • Accounting for an increased share in the property if you pay different shares of the mortgage repayments?
  • What happens if you want to sell?
  • Who benefits from future repair or renovation work?

Whereas the Basic Deed of Trust reflects the position at the outset of the arrangement, the Silver Shared Ownership Protection uses a formula that accounts for changes during your ownership. It doesn't include clauses which address house rules which are often needed when you have friends sharing together.

Silver Shared Ownership Protection

What does it include?

  • Your deposit contribution is shown clearly and separately from other joint owners
  • Our unique formula that calculates your share of any gain or loss in the property by taking into account your total investment including what you have added towards the initial deposit and your contributions towards mortgage repayments, the costs of buying and selling and repairs/renovations.
  • You can have Registered Legal Owners or Non-Registered Beneficial Owners (for example parents investing with children can be included in the Agreement)
  • Calculation for working out any gain or loss from rental income (if applicable)
  • Mechanism for buying up a co-sharer's interest in the property if they move out
  • Section for stating individual contributions towards outgoings
  • Mechanisms to protect you if a joint owner stops paying their share of the mortgage repayments
  • Procedures to sell your share
  • Procedures to deal with shock events such as death or a change in financial circumstances
  • Procedures for dealing with property repair and/or renovation costs (including how to calculate any gain because of development and how it will be shared)
  • Procedures to sub-let your share of the property
  • Procedures to follow if the home sharing relationship breaks down
  • Procedures to follow if you can't afford your mortgage repayments

The Silver Deed doesn't include:

  • Cohabitation agreement including splitting bills, living arrangements and how to settle an argument
  • Inventory listing of personal possessions for joint owners

Seek Independent Legal Advice

We recommend each joint owner seeks independent legal advice to ensure they understand their obligations under the Deed of Trust before they sign it, however you can choose not to do this if you are happy to sign without legal advice.

How to get a Silver Deed of Trust

  • The Silver Shared Ownership Protection is completed by our document creation service using the information you provide (see our terms here).
  • All parties need to read the agreement and email any amendments to be made.
  • You can choose to seek legal advice about the contents of the agreement with a qualified solicitor.
  • If all parties are satisfied with the contents of the agreement it should be signed and witnessed.
  • Pass the agreement to your solicitor handling your purchase to deal with registering the restriction against the property at the Land Registry.

Frequently Asked Questions

Is Shared Ownership Protection a deed of trust?

Yes. The Silver and Gold Shared Ownership Protection are deeds of trust with more additional clauses than the Basic Deed of Trust that reflect changes to living arrangements and give more flexibility which supports shorter term relationships.

Can I use Shared Ownership Protection when buying as joint tenants?

No. When buying as Joint Tenants you own the property 100% with the other joint owner. If you want to own separate shares of the property then you have to buy as Tenants in Common. Read more about joint tenants here.

Does the agreement take into account mortgage repayments?

Yes. The Silver Shared Ownership Protection's unique formula takes into account every mortgage repayment made by each of the joint owners. You must remember that all parties to the mortgage are jointly and severally liable for its repayment. The challenge that often arises for joint owners is when mortgage repayments aren't paid by one party and have to be covered by the other.

The Basic Deed of Trust only states that the joint owners will pay a share of the outgoings, which means that, in itself, the agreement doesn't offer a simple solution and the joint owners will be left needing to seek further legal support using the argument of either:

  • a Resulting Trust as the share of the mortgage repayments was pre-agreed before the mortgage was taken out (see case Cowcher Vs Cowcher where client A paid 100% of the deposit, but client B paid 100% of the mortgage); or
  • a Constructive Trust by way of no agreement before the mortgage was taken out (see case Curly Vs Parkes where Ms Parkes' sole name was on the mortgage and paid 100% of the deposit, however Mr Curley paid off some of the mortgage with a lump sum).

Obtaining a judgement on resulting or constructive trusts can be a lengthy and costly legal battle. The Basic Deed of Trust does not have provisions to handle the mortgage repayments, however the Silver Deed of Trust does include such a provision.

What happens when you sell?

When you sell you use your Silver Shared Ownership Protection to confirm your individual joint owner's share of any gain or loss associated with the property. The Silver Deed of Trust is used by the selling solicitor. It is important to note that property prices can go up as well as down so if you do make losses, then all joint owners are liable in direct proportion to their shares in the property.

What happens if I want to sell and another joint owner doesn't?

Either joint owner can sell at any time. If one party wants to sell then they must give written notice to the other joint owner/s who have rights of first refusal to buy the share of the property. If the other joint owner/s cannot afford to buy the share then the property is placed on the open market through an estate agent seeking the best price available.

Beware Early Mortgage Redemption charges!

If you have a mortgage with a fixed initial mortgage term then mortgage lenders include an Early Mortgage Redemption charge if you change your mortgage or settle it in full during this time. The cost can be in the thousands so be careful when looking to sell before your initial mortgage term expires.

Do I have to share the property 50:50?

No, using the Silver Deed of Trust's unique formula, your share of any gain or loss is worked out using a formula that takes into account your contributions towards the initial deposit, costs of selling and buying, mortgage repayments and repairs/renovations. The more you invest, the greater the share you have of any financial gain or loss associated with the property.

You can read more about this subject here: Can you have unequal shares in a property?

What happens if you pay different shares for repairs and/or renovations?

When your property is repaired and/or renovated, and its value is thereby increased, any person who contributes towards the costs of such repairs or renovations will be entitled to an interest in the land by way of a Resulting Trust proportionate to the extent to which the increase was attributable to their contribution. Improvements made much later than the date of purchase may give rise to a Constructive Trust.

What are home improvements?

It is important to note that only improvements to the property that increase the purchase price are included (this would normally exclude painting, new kitchens/bathroom). To find out which improvements are more likely to add to the resale value of your property on sale, please read Which Improvements Add to Your Home's Value

Here's an example: Jane and David buy a property worth £100,000. David spends £50,000 developing the property and the property is now worth £200,000, £100,000 more than before. David alone would be entitled to the value of the increase due to the development.

To obtain judgement on resulting or constructive trusts can be a lengthy and costly legal battle. The Basic Deed of Trust does not have provisions to handle the matter of repairs or renovations, however the Silver Deed of Trust does.

Drake v Whipp

In the case Drake v Whipp Mrs Drake and Mr Whipp left their spouses with the intention of buying a home and living together. They purchased a barn at a cost of £62,500 with the intention of converting it into a dwelling and living in it; £25,000 (40%) was paid for by Mrs Drake and £37,500 (60%) by Mr Whipp. Mr Whipp was the sole legal owner of the barn and they did not formally set out their intentions in an express deed of trust.

The barn conversion cost £129,000 of which Mrs Drake contributed £13,000 (10%) and Mr Whipp £116,000 (90%). They both worked on the conversion, of which he provided 70% to her 30% of labour.

Mr Whipp broke up with Mrs Drake and formed a relationship with another woman. Mrs Drake bought an action for an order of sale and division of the proceeds in equal shares. The trial judge held that there was no common intention and therefore applied a resulting trust. However, he allowed the respective contributions to the conversion to be taken into account rather than just the contributions to the purchase price. Consequently, she was entitled to a 19.4% share of the property. She appealed contending that the judge was wrong to take into account the contributions to the conversion under a resulting trust.

The appeal was upheld: Mrs Drake was entitled to one third of the beneficial interest. The trial judge was wrong to conclude there was no common intention since both parties intended that she would take a share. She assumed it would be equal, however he was of the opinion it would be in proportion to her contribution. There was no requirement that they had to agree on the extent of the share. Once a common intention has been found the court can take into account a wider range of dealings and is not confined to financial contributions.

Does paying the costs of purchase increase your interest in the property?

Yes. In our Silver Deed of Trust we include a formula that accounts for the costs of purchase such as solicitor's fees, removal costs and stamp duty. The more you pay towards the costs of purchase, the greater your share of any gain or loss will be.

If you opt for our Basic Deed of Trust you may still be able to seek a greater share of the sale proceeds due to an implied Constructive Trust, however this will need to be through legal action. In Curly v Parkes the Court of Appeal held that neither the payment of solicitor's fees and expenses, nor the payment of removal costs, were able to give rise to a presumption of resulting trust. They maybe, however, be relevant for the purpose of a constructive trust.

Does paying house expenses increase your interest in the property?

Not unless it is a substantial sum of money which could lead to the imposition of a constructive trust. The Silver Deed of Trust states your agreed intentions towards paying outgoings.

Burns Vs Burns

In the case Burns Vs Burns Mr & Mrs Burns lived as husband and wife and in 1963 Mr Burns bought a house in his sole name and he solely paid towards the purchase price and the mortgage. In 1975 Mrs Burns used her earnings to pay the rates, telephone bills and various other chattels for the house. In 1980 they split and Mrs Burns claimed to have an equitable interest in the house due to her contributions.

The Court of Appeal held that she was not entitled to an interest by way of a resulting trust because she had 'made no direct contribution to the purchase price'. Contributions to household expenses do not give rise to a presumption of resulting trust, however they may, if substantial, constitute sufficient detriment to lead to the imposition of a constructive trust.

What happens if we get married or have children?

You should review the agreement and see if it is still fit for purpose. When you get married or have children you may change your intentions towards each other. You should speak to a solicitor if you wish to protect your interests with a Prenuptial Agreement.

What happens if one or other of us becomes bankrupt?

If one of you becomes bankrupt, as long as you have a Deed of Trust registered as a restriction over the title, then your individual share is protected.

Make sure you pay your monthly mortgage repayments

Everyone who is a party to the mortgage deed is jointly and severally liable for repaying the mortgage. Your home may be repossessed if you do not keep up repayments on your mortgage.

If your mortgage lender consents to it, you may be able to sell the bankrupt party's share to someone else. Read more about this subject here - What happens if a Joint Owners Becomes Bankrupt?

Can I get a Silver Deed of Trust after I have purchased?

Yes. You'll need the consent of all the joint owners as to what the current value of the property is and what your agreed share percentage is at the point of signing. You'll then also need to get a solicitor to register the restriction against the property.

Do I need a will?

Yes. As tenants in common your share of the property passes to your estate on death. You will need to have a will drafted by the time you exchange contracts and this will state how you want your estate to be distributed when you die. The cost for our solicitor to draft your will is £180 INC VAT or a mirrored will is £299. Click here to read more about drafting wills.

Can I own a share in the property if I don't invest any money?

The Silver Deed of Trust allows for you to grow an interest in the property by contributing towards the costs of sale/purchase, mortgage repayments and repairs/renovations.

The Basic Deed of Trust doesn't allow for you to have a share of the property if you haven't invested a deposit. Although, you may be able to gain an interest in the property by being a part of the mortgage at the outset (Resulting Trust, see above), or by paying mortgage repayments and not being on the mortgage (Constructive Trust, see above).

Call our joint ownership specialists to draft your agreement 0333 344 3234

We can help you draft a deed of trust and will explain can be protected in the deed. For help call 0333 344 3234 or click the link below to get a quote.

Get a Silver Deed of Trust *
* Fixed Fee – Trusts to Suit Your Circumstances – Fast Turnaround (deeds issued within 1 to 3 days after instruction)



 

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Basic Deed of Trust
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Beneficial Ownership vs Legal Ownership
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Which Improvements Add to Your Home's Value?
12/11/2017
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