I put the deposit down on the house – Do I get more if we sell it?

The answer is…. it depends. It depends on a number of factors, and the answer can change according to your individual circumstances. To explore this topic, and to show how the answer may change over the course of your relationship, Frances Bentley  will explain about the purchase of her own house.

Cohabitation – couples who are not married

My partner and I bought my house (in joint names) in December. I put in the deposit which we agreed should be protected, should we ever separate in the future. We are not married (yet!).

We decided to enter into a declaration of trust, which is the best way to protect a deposit payment if one party puts down all or the majority of it. A declaration of trust is a document which outlines your intention as to how you own the property/ and who should get what in the event of a later separation. Our declaration of trust outlines that should the property ever be sold in a later separation; the deposit payment will be returned to me and we then divide the remainder of the proceeds equally.

As we are not married, the legal position with a jointly owned property is that “equity follows the law”, so unless there is a declaration of trust confirming otherwise, as we own the property jointly, the law would say the starting position is that the proceeds should be divided equally. However, as we do have that declaration of trust, in law, that should be followed instead.

So, the declaration of trust is a really important document.

If I had put a deposit into a property that my partner was buying in his sole name, then this becomes potentially even more difficult. Again, unless there is a declaration of trust in place confirming the deposit payment is to be returned to me, then, legally, because of the “equity follows the law” rule (and because we are not married), to depart from the position that my partner gets 100% of the equity upon a later sale, I would have to evidence that there was a “resulting” or “constructive” trust, which is difficult to do and a very complex area of law.

So, it is important to consider getting a declaration of trust for couples who are cohabiting/ not married.

Marriage

My partner and I are going to get married in August 2023, so how does this change the position/impact on the Declaration of Trust that we entered into?

This answer may actually change over time. The family home would become a matrimonial asset, and the starting point, for division of assets on the breakdown of a marriage is 50/50. That said, in a short, childless marriage (a marriage of, say, under 5 years) then a Declaration of Trust may still be persuasive (but not binding) if there was a later dispute.

However, if we have children, their needs will be the court’s “paramount consideration” in a later marriage breakdown, so, if the monies in the house are needed to meet the needs of the children, that would be the deciding factor. Also, the longer the marriage, the harder it is to depart from a 50/50 division of assets. So, a declaration of trust entered into before a marriage lasting say 25 years will not carry much weight, as the court will say that the assets/finances of the parties have become “intermingled” due to the length of the marriage.

To best protect your position, if you are going to get married or have just married, you could enter into a pre-nuptial agreement or post nuptial agreement – and whilst not legally binding they can be persuasive upon a later dispute on marriage breakdown.

So, as you can see, the answer to the question “I put down the deposit, will I get more” depends on a number of factors, including how the property is to be owned, whether or not a declaration of trust is entered into, whether or not you get married and how long you are married for.

Whichever way you look at it, the best way to protect any deposit payment is to consider how you are going to own the property at the outset and then explore your options. For example, you should take advice from a family lawyer as to whether you should enter into a declaration of trust, pre-nuptial agreement or post-nuptial agreement. At McAlister Family Law we can discuss these options with you and provide you with advice specific to your circumstances.