Split Of Sale Proceeds With A Mortgage

My husband, myself and my mother own a house as tenants in common. Mum has 50%, my husband and I hold 25% each as per the title deeds. My husband and I had a mortgage for our our 1/2 and Mum paid hers outright. Mum now has alzheimers and is in a care home and we have been forced to sell by the council. We were informed that the remaining mortgage would be paid off and then the proceeds split as per the title deeds. The council is disputing this and wants myself and my husband to pay off the mortgage out of our share of the property only as it was held in our names. A solicitor informed us that had we defaulted on the property mortgage my Mum would have become liable because she is on the title deeds regardless as to who has the mortgage. Are we correct in the way that the monies have been split i.e. mortgage paid off first and then proceeds split as per title deeds??

1 Answers

Obviously I haven't seen the title deeds or the mortgage conditions so I can only comment in general terms. Most lenders will insist that only those are party to the mortgage can be joint legal owners and named on the title deeds. Where a lender does allow a person to be named of the deeds without being a party to the mortgage (HSBC is one such lender) the "proprietor non-borrower or PNB for short" (in this case your mother) will have to countersign the mortgage deed to agree that if the bank repossesses and sells, if the borrowers' share of the sale proceeds is not sufficient to satisfy the debt it can take from the PNB's share. This is to do with the relationship between the bank and the PNB however. There is a separate relationship between the borrowers and the PNB and as between them the PNB is not responsible for the borrowers' debt. Presumably the PNB could sue the borrowers to recover any loss he/she suffered as a result of repossession and sale by the bank.

So if the owners decided they wanted to sell the property (or were forced to) then the mortgage would have to be paid from the sellers' share because the PNB is not responsible for the borrowers' debt. If the borrowers' share was not enough to repay the mortgage then the sale couldn't proceed, unless they came to an agreement to "borrow" some of the PNB's share.

As I say, I can only comment in general terms. You should seek proper legal advice on the following points:

Can the council actually force the sale or are they limited to putting a charge on your mother's equity so that they are entitled to some money when you decide to sell?
Did you and your mother receive proper legal advice when the mortgage was taken out and the property purchased? For example were you advised about how the equity would be split in the event of a sale? Were you offered advice on alternative options such as your mother lending or gifting the money she used to purchase her share?
Is there some other financial assistance you might be entitled to toward the cost of your mother's care?
Any other points your solicitor thinks might be relevant