I bought a house with a friend during the Celtic Tiger which then ended in negative equity. I moved a few years ago to rent somewhere close to work and by verbal agreement my friend was happy to stay there and cover the mortgage. The house paid for itself shortly thereafter and is now worth a little more than what is owed.
My friend lives there and pays the mortgage while I rent elsewhere. I asked my friend to sell or if he could take the whole mortgage about two years ago but he is having a hard time getting a mortgage on his own but also wants to leave or sell.
I was initially happy to walk away with nothing once they took out the mortgage because I hadn’t contributed, but now my friend is talking about waiting longer – maybe another one or two years – for get a mortgage.
Is it true that I would not be entitled to anything when the sale / transfer is finally concluded because I do not live there and I did not contribute to the mortgage?
I would like to go ahead and buy again but am not earning enough to borrow while my name is still on the other mortgage.
I have consulted a lawyer and a financial advisor, but it is difficult to get a clear answer. Would you be able to advise on my options and rights in the future?
Mr. BM, E-mail
I can understand why you had difficulty getting “straight answers” from your lawyer and that financial advisor. The two big issues here are that (a) even you aren’t clear on the current impact of the deal you have with your friend, and (b) in some key areas you don’t really know what you are doing. want to do.
It would be very difficult for the advisers to be final in these circumstances.
On paper you are listed as part owner of the property from what I understand and you are also listed on the mortgage. As far as the paperwork goes, this seems to be the case.
I don’t know, for example, are you common tenants, each owning a fixed share of the property, or are you joint tenants where you both own the whole. This may have – and should have – been dealt with quite categorically and in writing from the start, but I suspect that may not have been the case.
My clear advice to anyone considering buying a property with one or more friends is to avoid future problems by agreeing upfront who owns what and on what terms, and what will happen if one or more people want to sell. or have to sell. maybe because of a move or a loss of employment. And not just an informal out-of-court settlement, but a formal contract drawn up ideally by a lawyer, because words matter when it comes to disputes over things like this.
Either way, your current arrangement appears to be governed by a verbal agreement between you when you decided to move out of the property several years ago to rent closer to work.
Under this, your friend agreed to pay the entire mortgage on the property, but nothing seems to have been said about the property.
Based on that, it looks like you would still be sharing the property – I guess 50/50. Unsurprisingly, you have qualms about this. At one point, you were going to give up any claim to ownership; to another, you seem to think you should get a share, if only because your friend’s reluctance to sell (because he couldn’t get a mortgage in his own name) means you can’t also not get a mortgage because you are tied to it.
It’s very complicated and there are really only two ways to solve the problem.
The most expensive thing is trying to force your friend to sell to get you off the mortgage. If they resist you face potential legal action and quite frankly I have no idea how that would work. I suspect you might come out with a smaller share, but the legal fees would make that unnecessary and you would both end up out of pocket.
The most sensible approach involves the law as well, but in this case the lawyers and not the courts, the two of you sit down and craft an agreement on how to resolve your disputes regarding the management of this property – which is. , of course, which the two of you should have done right off the bat.
If it is about this, you need to be clear about your bottom line. You might like a share of the equity in the property, but from what I understand, you need your name on that mortgage so you can buy elsewhere.
If that means leaving your friend with most or all of the equity in that property to give him a deposit large enough that he can get a mortgage on an alternative property for himself, it seems like a price that is worth it. worth getting paid.
Likewise, if – perhaps with the help of a broker – your friend can persuade a lender that he can handle the mortgage (as he has clearly done for the past 10 to 15 years), can -being that he can stay in that house and you move on, without a mortgage, to get a loan elsewhere on your own property.
When you left the property initially, you kind of assumed that you were giving up your right of ownership. It may not be so legally, although finding out can prove costly. The good news is, the two of you are still on good terms. This is a big plus when it comes to contentious issues.
The bottom line, though: Only by finding a solution that works for both of you will one of you get what you want.
Please send questions to Dominic Coyle, Q&A, The Irish Times, 24-28 Tara Street, Dublin 2, or email [email protected] This column is a reading service and is not intended to replace professional advice. No personal correspondence will be exchanged