I have posted this on the Bankruptcy Forum but I am now posting on this forum with the possibility of an IVA rather than Bankruptcy in mind. I'd be grateful for any answers
Bankrupt's beneficial Interest in Partner's House:
My daughter has been living with her boyfriend for 12 months (they are unmarried). He is about to go bankrupt (due to debts arising from loans for car purchases about which she and we knew nothing).
The house is in her sole name, and there is no mortgage on it.
It was bought outright as a cash purchase immediately before they moved into it.
He made no contribution to the purchase (in fact, it was purchased entirely with funds provided to my daughter by myself and my wife).
There have been no improvements, extensions etc, made to the property since they moved in (hence none to the funding of which he made any contribution).
All bills are in my daughter's sole name.
HOWEVER, he does give her £50 per week (which we think of as 'rent' since if he didn't live there he *would* be living in rented accommodation costing at least as much) towards general household expenses.
Since there is no mortgage there is substantial equity in the property (approx. £150,000).
(1) Couod the Official Receiver argue that our daughter's boyfriend has a beneficial interest in the property?
(2) Could our daughter therefore be forced to sell the house?
(3) Could it be counter-argued that WE have a beneficial interest in the property (since, in fact, we paid for it -- not anticipating this situation)?
(4) Is it advisable for my duaghter's boyfriend to move into rented accommodation BEFORE he goes bankrupt?
One thing I should add. My daughter's boyfriend does not have a bank account (he has had credit problems before) and so he has arranged that his wage is currently paid into my daughter's account. However, that is NOT his contribution to the household -- the money is taken out by him immediately it appears in her account and he then gives her just the £50 per week 'rent'.
First of all, this is my opinion based on my experience - I'm not a technical expert.
1. I think your daughter's house should be safe. When I went BR I was living with my partner in his flat which had been bought by him with help from his mum. I had been livig there for about a year, and I contributed £200 a month 'rent' and and half towards the bills, and BI was never mentioned.
2. I can't think of any reason that your daughter would be forced to sell the house based on what you've said.
3. I presume that you can prove that you and your wife contibuted the funds to buy the house? In that case I would think you do have a beneficial interest.
4. I don't think there would be any benefit in your daughter's boyfriend moving before going BR, as he will have to list the address on his BR forms anyway.
Regarding the bank account, this isn't going to be a problem. I presume your daughter can show proof of the money going in and out of the account?
As I said, these are my opinions based on my experience last year, and one of the experts will be along shortly to put your mind at rest.
I don't think anyone would be able to successfully argue that your daughter's boyfriend would be able to claim an interest in her property. He has clearly been paying her rent, and this does not give rise to a capital interest in the property.
Thanks for your reassurances (I also had helpful advice on the sister forum).
Skippy: with regard to the money going into and out of the account -- it's taken out thro' a hole in the wall, so there is no proof that it is returned to my daughter's boyfriend.
Skippy: I was slightly surprised by your own case since you were contributing both to the mortgage and paying towards living costs. I've found cases on this forum where the issue of a BI has come up in similar cases (Lapdog, Puppy Boy, Info234, chancetrader, Tolate01, tocasc, supergran, cressdia, C-S).
This leads me on to a supplementary question.
Supposing my daughter and her boyfriend stay together, get married and have children -- could he then develop a beneficiary interest in the house by contributing towards the bills (i.e. by paying 'rent' -- I find it difficult to see how the concept of 'rent' applies to a contribution by one member of a married couple to another)? I appreciate, of course, that he would develop a beneficiary interest if, for example, he pays for an extension. But what if he just continues contributing to the bills as he does now (but maybe contributes more, e.g. if they have children). Obviously I'm asking this in case he gets himself into this situation again some years down the line (which is being VERY pessimistic of course). But is there anything that could be done to ensure that he does not develop a beneficial interest in the property?
I pay 'rent' to my partner, and my share of the living costs. However, I moved in with him in March 2006 and didn't pay anything to him as I couldn't afford to because of my debts. I went into an IVA in October 2006 but because the IVA payments were too high I still couldn't pay him anything. I only started making payments after I went BR in March 2007, hence the reason I had no beneficial interest in the property.
A benefitical interest can be developed over a period of time, especially if the non-ownder effects repair or improvement works, but this is always balanced against the arguement of "rent payable". Your daughter's partner should not effect any capital works to the property if he wishes to avoid a beneficial interest claim in the future.
