Joint owernship of negative equity house - one party refuses to contribute to mortgag

782378

Looking to get some advise in relation to a friend who jointly owns a house but the other joint owner refuse to contribute.

Scenario:
Person A + B Bought a house jointly 7 years ago and jointly lived in the house for 4 years.

3 years ago Person B moved to another part of the country and stopped making any mortgage contribution, forcing Person A to make up the shortfall.

The house is over 100k in negative equity

Person A now pays full mortgage.

Person B is unemployed has no savings and refuses to make any contributions to the mortgage.
Person B cannot afford negative equity shortfall in the event that the house is sold.

Person B, however, is joint owner as per the deeds and still presumably entitled to 50% equity in the house.

Person A, went to solicitor to try get person B to contribute to mortgage, which they can’t /won’t.

Can you give any advise to Person A in this type of scenario? have they any protection?, The solicitors suggestion is to write to person B and demand they make some contribution (which is unlikely).

nuac

Mod
Open for general discussion, no legal advice

Mr. Incognito

Tough one.

You cant get blood from a stone.

I could think of a few options but they are all blatantly legal advice.

Get a better solicitor.

Peregrinus

What outcome does person A want?

Ideally, perhaps, he'd like person B to repay person A for all the extra payments Person A has made on person B's behalf, and for the future to make his proper share of the payments. But, clearly, that's not feasible. Person B simply doesn't have the money.

On the assumption that the agreement at the outset was that A and B would meet the mortgage payments in equal shares, I'd say there's an accumulating debt from B to A in respect of the extra payments that A has made on B's behalf.

If nothing is done and A keeps making payments, B's debt to A will continue to grow. That may be burdensome for B, but it's not a lot of consolation to A, since the prospects of ever being able to collect the debt are not looking so hot.

If A stops making payments, the house will be sold and the proceeds applied to reduce the mortgage debt. A and B will continue to be jointly liable for the repayment of the balance of the debt, but any enforcement will primarily impact A, since B is not a mark.

If A is willing to continue to make the full payments indefinitely, he should approach B and suggest that B transfer his share in the house to A, in return for A taking on full liablity for the mortgage. The agreement of the bank will be required, and this will not be easily obtained (since this deal makes the bank's position worse).

Failing that, B could be invited to sign and agreement that the extra payments being made by A are a debt due from him to A, and that on the sale of the house the repayment of this debt will be a charge on B's share (if any) of any sale proceeds. This doesn't provide a lot of comfort, since on the sale of the house as matters stand there wont' be any share of proceeds for B. But we might hope for better things at some point in the future.

Your basic problem here is not a legal one, but a financial one; the house is worth less than the loan, and one of the borrowers is unable to do his bit to service the loan. There's no legal strategy that will alter these facts. I think what A needs to do is to develop a financial strategy for getting the least worst outcome out of this situation, and then talk to his solicitor about the legal mechanisms for effecting it.

Mrs OBumble

Seven years ago was 2010 - the crash had totally happened by then.

Thetes no way a house purchased then should now be in negative equity.

deandean

That phrase 'jointly and severally liable' is probably in the bank loan documents somewhere. So if the house is sold, A could be on the hook for all the debt if B has no money. Not a nice situation for A.

TopTec

Mrs OBumble wrote: »

Seven years ago was 2010 - the crash had totally happened by then.

Thetes no way a house purchased then should now be in negative equity.

I was a buyer in 2010 and (dublin aside), house prices continued to fall for a few years after that, especially in the more rural areas.

My place is probably now worth what paid I for it then. A good few around here are still miles away from getting out of negative equity.

TT

seamus

At the base of it, if the deeds were signed as joint tenants and the mortgage taken out as "joint and severally liable", then the two people have effectively entered into a handshake agreement to split the house in half and repay the mortgage together without any legal agreement on how much each party pays.

That's the reality of it, and even if person A completely repays the mortgage on his own, Person B is entitled to a 50% share in the property if/when A goes to sell. Be that in five years or 30 years.

The advice given by Peregrinus is spot on. The ideal outcome for A is that he convinces B to hand over his 50% of the house. He could also take the nuclear option, stop paying the mortgage and plead bankruptcy. B would basically be forced to do the same. That's scorching the earth though, putting himself into a financially difficult place in order to force B's hand.

That said, if he's "stuck" with a property he doesn't want, and repaying the full mortgage on a house he half owns, and won't get out of negative equity for a decade, throwing in the towel and looking at bankruptcy may be the best long-term option. Worth discussing with a financial advisor.

782378

Thanks Peregrinius, appreciate you taking the time to go though the various options. Your post is very helpful and give some food for thought.

lifeandtimes

Peregrinus wrote: »

If A is willing to continue to make the full payments indefinitely, he should approach B and suggest that B transfer his share in the house to A, in return for A taking on full liablity for the mortgage. The agreement of the bank will be required, and this will not be easily obtained (since this deal makes the bank's position worse).

The bank won't allow just a straight transfer or relinquish of ownership by person B.

Person A would need to basically remortgage the house,show on paper they can keep repayments and remove person B name