Property Settlement Agreement
(Last Updated: 08/03/2024)
10/11/2020
43
5 min read
Co-owners of a property can draft a property settlement agreement to record the terms of a transaction such as the payment from one party to the other in a Transfer of Equity. A Property Settlement Agreement is drafted by solicitors, normally at the end of a dispute, and stops any future claim over the property.
The most common use for a Property Settlement Agreement is upon sale of a property so that the co-owners can agree the distribution of sale proceeds. The settlement document could be by way of an agreement of divorce and set out within a divorce order.
The agreement ensures that the parties cannot make a future claim to an interest in the property or the other co-owner. To avoid future disputes:
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Draft a property settlement agreement - we can help draft this agreement for you so call us on 0333 344 3234 or contact us online now for a quote
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Independent legal advice - only one co-owner will get advice from the solicitor who drafted the property settlement agreement. Any other party to the agreement should get independent legal advice to the terms of the agreement before signing. If we haven't drafted the Property Settlement Agreement our solicitor can provide the other party the independent legal advice.
If you do not draft a Property Settlement Agreement any co-owner can claim that they were not aware of what they were signing and the actual beneficial interest of the parties could be in dispute requiring the legal system to settle the claim.
Here are some examples of how a Property Settlement Agreement could be used:
Unmarried breakup. The co-owners have broken up and one of them pays £25,000 for the other party's equity in the property. A solicitor is instructed to handle the transfer of equity and to record the terms in a settlement agreement.
Friends buying each other out. Similar to the above, one of the parties wants to leave and be paid their equity from the property. The parties come to an agreement of what the equity is worth.
Between family members. There can be disputes around amounts to settle the ownership between family members, especially if any of the family are married and they are going through a divorce. The share of the co-owned property will fall under the divorce settlement even if his/her name isn't registered over the property.
Do you always need a Property Settlement Agreement?
When joint owners of a property sell or transfer their beneficial interest they may already have a legal agreement drafted to confirm what they are due. These may be:
- Deed of Assignment - often used to share property income between co-owners of a rental property.
- Deed of Trust - often used to share property income between co-owners of a rental property.
There are some transactions where, even with a Deed of Trust which confirms the beneficial interest, the parties may still dispute the distribution of the net sale proceeds. In these cases a belt and braces approach is to agree the split and sign a Property Settlement Agreement.
Property Settlement Agreement Template - What should be included?
As a general rule these are the points that get covered:
- names of the parties and their current home addresses
- amount of consideration (includes money changing hands and any debt taken on like a mortgage)
- the beneficial interest amount being purchased
- confirmation that the party selling their interest has no further right to live and no claim of any benefit from the property
The agreement will require both parties to seek independent legal advice from a solicitor to ensure they are aware of what they are agreeing to before signing the agreement.
Who can use a Property Settlement Agreement?
Unmarried couples, friends or family, however if you are married then unless the settlement is part of a divorce order, you may find the property settlement agreement is set aside by a Judge if you start divorce proceedings.
Property Settlement Agreement Quote
The usual protocol for couples who are separating and want to agree how their jointly owned property will be split, would be to agree a Settlement Agreement.
In it, the parties agree how the departing cohabitee will be compensated or bought out by the remaining cohabitee. The options are that the departing cohabitee remains on the title and is indemnified against the mortgage obligations, or, the departing cohabitee transfers their equity to the remaining cohabitee for an agreed sum.
If the departing cohabitee is coming off the title, they need to agree in the Settlement Agreement to sign a TR1 (which is a conveyancing transaction undertaken by a conveyancing solicitor and falls outside the scope of work). If the departing cohabitee is staying on the title, the parties can agree in the Settlement Agreement to complete a Deed of Assignment of the departing cohabitees share to the remaining cohabitee.
Its also possible to agree obligations around bills and child maintenance in the Settlement Agreement if the parties want to do that. Anything more complex like access or custody arrangements is outside of this scope but we can cover that for an additional cost if you would like to. That would take you into the territory of a Separation Agreement (akin to a Financial Order in Divorce) which is more complex.
We would estimate this to take 2 - 3 hours work to produce a Settlement Agreement draft and then one further revision at a cost of £720 INC VAT.
A Separation Agreement is likely to cost in the region of £1499 INC VAT.
The transfer of equity would be placed with conveyancing solicitors and would likely cost £499 INC VAT plus disbursements. We would advise not to instruct the transfer of equity until you have signed Settlement Agreement (as you do not want to pay for a transaction that is not guaranteed to come to fruition). You should agree the split of legal costs in the Settlement Agreement.
Whichever party is not using a solicitor (if any) will also need to get an ID1 verification which we can offer as a service for £120 INC VAT.
Divorce Property Settlement
We have seen above, a settlement document could be drawn up by way of an agreement of divorce, however instead of an agreement which confirms one party owns a share in the property, it could be a document that confirms one of the parties has no beneficial interest. This type of Divorce Property Settlement is called a Declaration of No Interest.
THis type of legal document is drafted by a solicitor and often called a Property Settlement Agreement after Divorce. We can draft you a Declaration of No Interest so call us to find out more - 0333 344 3234.
Written by:
Andrew Boast
Andrew started his career in 2000 working within conveyancing solicitor firms and grew hands-on knowledge of a wide variety of conveyancing challenges and solutions. After helping in excess of 50,000 clients in his career, he uses all this experience within his article writing for SAM, mainstream media and his self published book How to Buy a House Without Killing Anyone.
Reviewed by:
Caragh Bailey
Caragh is an excellent writer and copy editor of books, news articles and editorials. She has written extensively for SAM for a variety of conveyancing, survey, property law and mortgage-related articles.
