PLEASE NOTE: Information in this article is correct at the time of publication, please contact DFA Law for current advice on older articles.
Buying run-down properties and renovating them for resale with a view to profit is a very common way of making money. However, one young couple discovered to their cost the foolishness of entering into such ventures without proper legal advice.
The woman, who had been with her boyfriend for some years, bought a property for £315,000. She provided the purchase price and he contributed his labour to the project and paid for equipment and materials. The property was held in her sole name but their plan was to put any profit generated towards a home in which they would live together.
They did not consult a solicitor before entering into the joint venture and, when their relationship ended, the woman insisted that her ex-boyfriend was entitled to nothing. After he launched proceedings, a judge found that they had signed a contract whereby it had been agreed that he would be entitled to one third of any profits yielded by the project.
There was only one copy of that document, which was not professionally drafted and which was destroyed by the woman’s mother after the couple split up. However, the judge found on the evidence that a binding agreement had been reached. In those circumstances, the woman was ordered to pay her ex-boyfriend just under £50,000 to cover his expenses and his share of the profits. She was also ordered to pay the legal costs of the case and her total bill came to about £200,000.
Any financial agreement, whether small- or large-scale, should only be entered into with the benefit of professional legal advice and should be documented.
Failing to follow basic best business practice is a risk, and making sure disputes cannot arise is a much better option than having to fight out disagreements in court.