35 FairdaleGardens

Putney

SW15 6JW

15 September 2011

Hi Nick,

We saw the solicitor today.

  1. He confirmed that the way you would have to do it is to, severe the joint tenancy on Wembley, then set up a deed of trust on how the equity is held in percentage terms.
  1. The steps that need to be taken are:
  1. Agree the value of France (80k).
  2. Agree the value of Wembley (I will use the figure of 280k for now, but you need to agree with mum exactly what value is).
  3. You then have to give mum 40k of your share of the equity in Wembley and she will give you 40k of her share of the equity in France.
  1. You will then have 100% of the equity in France and mum will have a percentage of the equity that reflects the amount of equity you both have after you giving her 40k of your equity in Wembley.
  1. So for example with Wembley at 280k and the mortgage 165k (these are rough figures for the moment, you need to confirm the exact amounts), the equity that you and mum share 50/50 is 115k.
  1. That it £57,500 each; you are going to give mum 40k leaving you with £17,500 (you both also are owed money by Kyle, but that is a separate issue, as the equity you both hold in the property is what is left after the bank takes its share which is £165,000 (approx)).
  1. The next step is to work the percentage of the equity that you will hold and what mum will hold.
  1. On 1% of 115K is £1,150.
  1. So you hold £17,500 after giving mum your 40K and mum will then hold £97,500. of Wembley and you will hold £80,000.of France and mum none.
  1. Both of you will have equity in property worth £97,500.
  1. The percentage that reflects the ownership of the equity in Wembley is as follows:
  1. £97,500 divided by £1,150 equals 84.782608, this is the percentage of the equity mum would own in Wembley after you have given her £40,000 of your equity in Wembley.
  1. £17,500 divided by £1,150 equals 15.217391, this is the percentage of the equity you would own in Wembley.
  1. This would then be declared in a Deed of Trust which the solicitor would draft.

Liability under the mortgage

  1. You would both remain liable for the debt of £165,000 although that will only be secured against Wembley.
  1. You will have a property that is liability free and a share of Wembley that remains encumbered.
  1. Wembley will still be earning you both money, and the rent will be shared in the following way.
  1. Wembley is currently (for the purpose of this calculation) worth £280,000.
  1. Bank of Scotland owns: £165,000.
  2. Mum will own: £97,500.
  3. You will own: £17,500.
  1. You both share 50% of debt (but you and mum are joint and severally liable to pay if you or mum stop paying, the bank will reposes and realise their asset selling the property on their terms.)
  1. The rent however more than covers the current interest on the mortgage.

How to share the rental income

  1. The rent is generated from the total value of Wembley; the joint debt between you and mum is £165,000 (although part of that went to Kyle it remains as the debt you owe to the bank and Kyle is paying the interest on £33,000 (I think that is the amount)).
  1. You work out what percentage of the total value of the property 160k represents.
  1. 1% of 280k equals £2,800, so the bank owns £165,000 which equals to 58.928571% of Wembley.
  1. What is left is Mum owns £97,500 which equals 34.821428% you own £17,500 which equals 6.25% (these percentage figures are to the closest .000001%).
  1. This would mean that you would share the 58.928571% of the income of the rent 50/50 as this is the income generated by your joint debt. Mum would then take a further 34.821428% of the income and you the final 6.25%.
  1. So with the rent at the moment £1200 (I think that is what you are getting) you would share that:
  1. £707.14285 being generated by the debt to the bank shared 50/50, that is £353.57142 each.
  1. Then Mum would get a further 34.821428% of the rent which is £417.85713, and you would get a further 6.25% of the rent which is £75.00.
  1. So your share of the rental income would be £428.57 and mums would be £771.42855 per month.
  1. You would both then have to pay your 50% share of the mortgage which at the moment is approximately £220 per month between you (I think) that is £110.00 each (although Kyle is currently paying his portion of that).
  1. So after paying the current interest you would be taking approximately £318 per month and mum £660.00 (or slightly more because Kyle will be paying his share as well).
  1. With regards to repairs to the property this would have to also be split in the same way as the income. You would be both liable 50/50 for the banks share of the house and then liable in the percentages reflecting the percentages you both take from the rent.

Next steps

  1. The solicitor would put in deed of trust how the property is held the way you share the rent would not be part of that deed, it would be a separate agreement between you and mum. You could put it in writing if you wish and it would form a contract.
  1. Let me know if you are happy to go ahead and I will let the solicitor know and he will draw up a deed.
  1. You still need to decide on the value of Wembley. The figures I have use are what I understood Ian had valued it at but that is for you and mum to agree upon.
  1. The cost is £400.00 to draw up the deed which would be split 50/50.

Neil