Question about percentage of equity in house

[ilikecrisps]

Hello. I wondered whether anyone could help me with a question I have. I know this isn't urgent, as are many of the other questions on this forum, but it's something I'd like to have clarification on before I approach a solicitor to draw up any documentation.

By way of background information, my wife, infant son and I moved into my mother’s house (“house 1”) 11 years ago. About 10 years ago, my mother transferred 50% of the equity in her house to me, the consideration being natural love and affection. My wife was not on the deeds.

When my second child was born a year later, I used the proceeds of sale of my flat and my savings to substantially improve house 1, extending to make a larger kitchen, additional bathroom and improving the formerly dangerous garden, making the whole place more spacious, and safer for both young children and my elderly mother (who was beginning to find stairs increasingly difficult). The work also considerably increased the value of house 1.

Four years ago, we sold house 1 and moved to house 2, which was more expensive. The house was registered in my name and my mother’s name. The entire proceeds of the sale of house 1 were put towards the purchase of house 2 and the difference between the house prices was paid by me from my savings, together with all the moving costs, legal fees and stamp duty.

Since living in house 2, I have paid for many alterations and improvements to the house, from practical things like installing a separate kitchen for my mother and improving the heating in her room, to essential works such as replacing ailing plumbing and roof repairs, to cosmetic improvements.

The money I spent on house 1, the moving costs and the money I’ve spent on house 2 so far comes to some £182,000 (and this amount is rising, as I’m about to undertake a garden project).

My question is: has the equity balance changed from 50/50?

I had house 1 valued before the improvement works were carried out and it was valued at £300,000. This means that at that point, my mother’s equity would have been £150,000. Once we moved in with her in house 1, she stopped spending money on the house, its upkeep or the utilities. Does this mean that she put £150,000 towards house 2, or am I completely getting this wrong?

Any advice you can give will be much appreciated.

[ilikecrisps]

Re: Question about percentage of equity in house

I meant to say that I know this post isn't urgent, as many of the other posts on here really are. Apologies for bad typing and for any confusion!

[Peridot]

Re: Question about percentage of equity in house

Hi ilikecrisps,

There are different ways co-owners can own a property these are as joint tenants or tenants in common. Do you know how you hold the property with your mother? Was a deed of trust prepared when you purchased the property?

If held as joint tenants, the property automatically passes to the survivor of you and your mother. Tenants in common means that your share (there is an assumption this will be 50%, if there is no deed) can be 'willed' to anyone. Bear in mind if you will your share of a property then to allow the survivor to remain living at the property there may need to be a clause included in the Will to ensure this is dealt with.

If you are joint tenants then it is possible to change the way you both hold the property by 'severing your tenancy'. This is a straightforward process and a restriction would be placed on the title, held at the Land Registry to indicate this. Your respective shares would as mentioned above be 50/50 unless indicated otherwise by way of Deed of Trust which would need to be drawn up, if you held the property in any share other than 50/50.

Any agreement to hold unequal shares would need to be agreed between you and your mother. It is not something you can decide yourself because you have spent more money on the property, for example.

You need to have the discussion with your mother as a first step and if you agree the shares should be amended then you need to see a lawyer to prepare a deed of trust, if this is appropriate.

Once a tenancy has been severed it is important that you both have wills prepared to deal with your own shares of the property, but also dealing with what happens to the survivor, whether they can remain living in the other's share for example and who would be responsible for insurance etc. Do you have any siblings? Would your proposed course of action cause any family issues? Just some pointers that may need to be considered.

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