A floating deed of trust allows the co-owners of a property to have a beneficial interest that changes over time by their individual contributions toward:
- 1
Purchase price (deposit/current equity split)
- 2
Purchase costs (SLDT, legal fees, etc.)
- 3
Repairs/Renovations
- 4
Mortgage repayments
Unlike a fixed beneficial share deed of trust which doesn't go up or down even if one party moves out and stops paying toward the mortgage, a floating deed of trust allows for the co-owners to pay more of the above and increase the beneficial ownership. This will in turn increase their share of any gain or loss from the net sale proceeds.
This service is available at a Fixed Fee of £399 INC VAT. Terms apply.
Frequently Asked Questions
We offer the standard clauses found within our Basic Deed of Trust, however replace the fixed formula with the variable based floating formula. The clauses included are:
- Lists the names of all legal and beneficial owners
- Floating formula for distribution of property income (rent/net sale proceeds)
- Explains how to share rental income
- States the individual contributions toward outgoings
- Maintenance obligations
- Process for transferring beneficial interest between parties (buying each other's beneficial interest)
- Process for how to sell the property in the future offering right of first refusal to the other co-owners
We can add additional clauses into the agreement to suit your intentions/circumstances however these will be chargeable at our solicitors hourly rate.
The formula is broken down into 5 stages.
- 1
The change in the value of the property is apportioned between the contributions towards the purchase (original deposit and the costs of purchase such as SDLT) and improvement of the property made by the co-owners individually and by virtue of the mortgage advance(s).
- 2
The increase or reduction in the value of the property attributable to the amounts(s) provided by way of the mortgage(s) is apportioned between the co-owners according to their respective contribution towards repayment of the mortgage(s).
- 3
The co-owner's entitlements from stages one and two are added together.
- 4
The sale costs (such as estate agents and legal fees) are apportioned between the co-owners in accordance with their entitlements in stage three.
- 5
The co-owner's shares of the net proceeds of sale are ascertained.
This is the generally accepted formula that the courts would likely use to settle a beneficial interest dispute and we cannot make any changes to it.
The formula used in the floating deed of trust is the same one used when a court needs to confirm a beneficial split in a property where the joint owners don't have a deed. This means that the formula is tested and is in accordance with applicable laws.
Where you want to change any part of the formula this can affect the overall result and as such you are risking a future dispute between the joint owner/s. If you still want to change the formula then you need to:
- 1
supply your intentions for the beneficial interest over the lifetime of the property;
- 2
depending on the complexity either our solicitor will charge an hourly rate to draft the clause or we will get a quote from a specialist external counsel to draft the clause for you;
- 3
the clause is drafted and included within the deed of trust you have purchased.
It is important to ensure all parties get independent advice regarding the agreed beneficial interest split, especially if the floating deed of trust formula is complex, as it will reduce the chances of the deed being contested for unfairness in the future.
You can work out the current equity in the property by taking the estimated current market value or purchase price deducting all mortgage debt and what is left is your current equity.
If you try and get repaid any additional money on top of the current equity then this is a loan agreement between the parties as there is not enough equity in the property to cover the amounts being repaid.
You aren't repaid the money you paid toward the property, however the money you pay increases your contribution toward the property in the floating deed of trust formula and thus increases your beneficial share of any net sales proceeds.
There is no definitive list of what counts as a repair or renovation that adds value to the property. Painting and tiling won't but extending and adding a new room will.
To account for this you should keep a register of works undertaken and who paid for them and then on sale or transfer use a RICS surveyor to value the property with and without the works that have been undertaken. If the surveyor does not feel the property price has changed because of the works done then they will inform you.
If you wish for a specific clause to be created within your floating deed of trust to confirm what works are repairs and renovations that will increase your beneficial interest then send these to us and we will quote you for the inclusion of this clause at a rate of £200 EXC VAT per hour. Only the floating or bespoke deed of trust service can have this definition because the other deeds of trust do not include the floating formula.
The renovation cost isn't repaid to the co-owner as part of the floating deed of trust formula to distribute net sale proceeds. Payments toward renovations increase a co-owner's total spend toward the property that in turn will increase their beneficial interest used to share net sales proceeds on sale or transfer.
For example, if you spend £100,000 to add an extension onto the property, the spend of £100,000 is added to your contribution toward the property in the formula and will increase the beneficial interest. Your beneficial interest is a percentage that is used to share any gain or loss from the net sale proceeds. The £100,000 for renovations is not repaid to you. If you want this to be repaid then a separate loan agreement is required to be drafted at an additional cost of £399 INC VAT.
- 1
we charge an hourly rate of £200 EXC VAT per hour to include your changes. The changes are of your own choice and as such we take no responsibility as to their future enforcement.
- 2
the party to the floating deed of trust who is not a client must obtain independent legal advice with regards to the deed. This is an additional cost and we cannot act for them due to a conflict of interest with our own client.
If you wish to cancel your instruction following the receipt of your first draft of the deed then you will be liable for the work undertaken until you cancel at our hourly rate of £200 EXC VAT per hour.
All parties to the floating deed of trust must have their signature witnessed by separate witnesses not the same person. The witnesses can be a friend, co-worker or neighbour, but not family or someone who benefits from this transaction. The witness must sign the deed, print their name and provide their home address.
The outgoings are stated at the outset. However, the formula accounts for either party to pay any variable share of the mortgage repayments and this will then directly effect their share of the beneficial interest on sale. Although, please note: all parties named on the mortgage are jointly and severally liable to repay the mortgage no matter what.
There are no maintenance obligations in this deed however it is in the interest of both parties to keep the property in good order to achieve the highest sale price
Fill out now as a legal owner, sign and witness and then send to your solicitor to date upon completion of your transfer.
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