Rental Property - Deed of Trust - Beneficial Interest

[Rinko]

Evening PH massive,

Just in the process of purchasing a BTL property, which is intended to give me wife a small income stream, as she isn't currently working as she looks after our young tribe.

The property is being purchased by both of us as tenants in common, and I would like to transfer the majority of the beneficial interest in the property to my wife via a deed of trust. However I would like to retain an equal division as far as the legal ownership is concerned. I understand that we also need to complete the HMRC form 17 to inform them of the income distribution from the property.

However our solicitor, who is handling the purchase of the property, has said that what I have described above is not possible using a deed of trust and we have to vary the legal ownership to achieve our aim.

I've read what I can on the subject, but I hope someone might have some experience of this which they can share, before I seek out a property specialist to help.

Thanks in advance!

[Rinko]

Claudia Skies said:

Basic position:

Joint tenants - (sometimes called ‘beneficial joint tenants’) both have equal rights to the whole property and this is always the situation unless there is something stated by Deed to the contrary. So essentially with two people it's a fixed 50:50 arrangement. The property automatically goes to the survivor if one of them dies. Their Wills have no relevance.

Tenants in common - can own different shares of the property. For instance, the paperwork might say 70:30 when the house is bought. A couple might later decide to change this to 60:40 which can be done by means of a Deed changing the beneficial interests. Each part owner owns their stated percentage and can pass on their share of the property by Will.

It is generally possible to switch between the two approaches with the help of a solicitor as circumstances change. However, if there is a mortgage over the property you may well find that you can't change anything without the consent of the bank.

If you are not happy with the advice you have received from your solicitor you need to contact someone more senior in the firm to raise your concerns, or find another solicitor. I think where you may be going adrift is trying to specify, say, 50:50 and 80:20 at the same time, so you could start by having another conversation with your existing solicitor.

Edited by Claudia Skies on Monday 23 February 22:35

Hi Claudia, I believe understand the situation regarding joint-tenants vs. tenants in common, and this is the reason why we chose the tenants in common to allow us to vary the shares in the property as required. It was really my understanding (or possibly misunderstanding) that the legal ownership and beneficial interest in the property could be held at different percentages via a deed of trust.

I will certainly ask for a more senior solicitor (or a property specialist if required) for their input, but I really just wanted some anecdotal evidence that what I was asking for was even possible.

STattam said:

Hi,

HMRC are getting increasingly keen on ensuring that the balance of equitable split matches the income split, i.e the equitable split matches the rental split.

inhope that helps

Spence

Thanks STattam - is this from your experience, or is there any guidance you can point me towards on the matter? The HMRC's form 17, which I mentioned in my first post, seemed like the means to declare the split for tax purposes (but again I could be misunderstanding it's purpose), without the need to vary the legal ownership/equitable split.

Thanks again for any and all input - really all I want to establish if whether what I believe I can do is possible before I start paying for more senior solicitors.

[Rinko]

Thanks everyone, it sounds like the solicitor was correct and my understanding was flawed!

Cheers,

R.