I bought a house with a friend during the Celtic Tiger which subsequently ended up in negative equity. I moved out a few years ago to rent in a location close to work and, under a verbal agreement, my friend was happy to stay there and cover the mortgage. The house broke even shortly after and is now worth a good bit more than is owed.
My friend has been living there and paying the mortgage while I rent elsewhere. I approached my friend about selling or whether they could take on the full mortgage about two years ago, but they are struggling to get a mortgage on their own but also do want to leave or sell.
I was initially happy to walk away with nothing once they took on the mortgage as I hadn’t been contributing, but now my friend is talking about waiting longer – possibly another one or two years – to get a mortgage.
Is it the case that I would be entitled to nothing when eventually the sale/transfer goes through as I haven’t been living there and contributing to the mortgage?
I would like to move forward and buy again but I don’t earn enough to borrow while my name is still on the other mortgage.
I have been to a solicitor and a financial adviser but it is difficult to get a straight answer. Would you be able to give some advice on what my options and rights are going forward?
Mr BM, email
I can see why you’ve had some issues getting “straight answers” from your solicitor and that financial adviser. The two big issues here are that (a) even you are not clear about the current impact of the agreement you have with your friend, and (b) in certain key areas you don’t really know what you want to do.
It’d be very hard for advisers to be definitive in those circumstances.
On paper, you are listed as co-owner of the property from what I gather and you are also listed on the mortgage. As far as paperwork goes, that appears to be it.
I don't know, for instance, are you tenants in common, each of whom owns a set share of the property, or are you joint tenants where both of you effectively own the whole thing. That may – and should – have been sorted out quite categorically and in writing at the outset but I suspect it might not have been.
My clear advice to anyone thinking of buying a property with a friend, or friends, is to avoid future problems by agreeing at the outset who owns what under what terms, and what will happen should one or more people want to sell, or need to maybe because of a job move or a lost job. And not just a friendly informal agreement but a formal contract drawn up ideally by a solicitor, because words matter when it comes to disputes on things like this.
Anyway, your current arrangement seems to be governed by a verbal agreement between you when you decided to leave the property several years ago to rent closer to work.
Under that, your friend agreed to pay the full mortgage for the property but nothing appears to have been said about ownership.
On that basis, it would appear you would still share the ownership – I’m guessing 50/50. Not surprisingly, you have qualms about this. At one point you were going to relent all claim to ownership; at another, you seem to feel you should get some share if only because your friend’s reluctance to sell (because they could not get a mortgage in just their own name) means you, too, cannot get a mortgage because you are tied to this one.
It’s all very messy and there really are only two ways to sort it out.
The more expensive one is to try to force your friend to sell to release you from the mortgage. If they resist, you are facing potential legal action and, quite frankly, I have no idea how that would work out. I suspect you might exit with a smaller share but the legal costs would possibly make that irrelevant and you would both end up out of pocket.
The more sensible approach also involves the law, but in this case, solicitors not courts, with the two of you sitting down and drawing up an agreement on how to resolve your differences on dealing with this property – which is, of course, what the two of you should have done at the outset.
If it comes to that, you need to be clear in what your bottom line is. You might like a share of the equity in the property but, as I understand it, you need your name off this mortgage so that you can buy elsewhere.
If that means letting your friend have most or all of the equity in this property to give them a substantial enough deposit that they can secure a mortgage on an alternative property for themselves, that seems a price worth paying.
Equally, if – maybe with the help of a broker – your friend can persuade a lender that they can manage the mortgage (as they have clearly been doing for the last 10-15 years), perhaps they can stay in this home and let you move on, mortgage-free, to get a loan elsewhere on a property of your own.
When you left the property initially, you kind of assumed you were giving over your right of ownership. That may not be so legally, though finding out could prove costly. The good news here is that you are both still on good terms. That’s 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 either of you end up with what you want.
Please send your queries to Dominic Coyle, Q&A, The Irish Times, 24-28 Tara Street, Dublin 2, or email dcoyle@irishtimes.com. This column is a reader service and is not intended to replace professional advice. No personal correspondence will be entered into
