# Fair distribution of gain/loss when owners have different ownership levels

Hi all,

We are a couple looking at buying a new flat, and since we are not married we will draft an agreement between us to divide the future value in case of a split or buy-out. We will enter with different deposits, while paying 50/50 on the mortgage and future expenses (value enhancing work/maintenance etc). Now we have a few questions that we would appreciate you views on;

1. Calculating the ownership levels:
Person A:
Cash: 200.000
Withdrawn pillar: 50.000
Pledged pillar: 28.000
Total: 278.000

Person B:
Cash: 25.000
Withdrawn pillar: 5.000
Pledged pillar: 60.000
Total: 90.000

How should the ownership level best be split in the above scenario? Based on total security capital for the loan or only based on the cash (200 and 25) and disregarding any pledged pillars?

2. Calculating the equity gain/loss in case of a split or buy-out
Letâs assume the above parties take a loan of 1.2 million CHF, and pay 50/50 on all mortgage/amortisation costs and 50/50 on expenses and maintenance etc. How should the fair gain/loss be calculated in case of a buy-out or sale? We are looking for a distribution that fairly awards the person that put the most cash in from the beginning, but that also takes into account a fair distribution when looking at the equal 50/50 payments over time. Do we take into account the increased tax burden of the party that has the highest ownership%?

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If the mortage is 50/50, wonât that mean that person A owns 600k + 278k and person B owns 600k + 90k? So itâs a 56/44 split overall.

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You are making things complicated and the law may not follow your logic (i.e. your calculated âownershipâ may not match the actual ownership% each partner will have on the flat). The easiest way to do it is to decide ownership amounts beforehand and cut all future expenses and benefits according to that ratio (so not 50/50).

To keep it simple with your intended goal, I would calculate the global contributions of each, regardless of whether theyâre directed toward consumption, value adding or a factor of the original invested amount and divide it by the total inputs made by both.

Example:

For the starting inputs, I donât know how to account for pledged pillars. I would probably account only for cash and withdrawn pillars inputs. You may decide of some âfakeâ lease on the pledged funds to account for the lower interests you get on the mortgage as a result of it.

Overall, it does seem too complex to me, and prone to litigation if things go sour. I would stick to ownership% as a function of initial capital included in, then participation to costs according to the ownership%. Some percentage rent from the lower% owner toward the higher% owner might make things more fair. I wouldnât care for it if it were me but other people might.

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Exactly, so my calculatipn says the following.

To calculate ownership shares:

• Person Aâs Share = 278,000 / (278,000 + 90,000) â 75.5%
• Person Bâs Share = 90,000 / (278,000 + 90,000) â 24.5%

So share future expenses by this percentage share

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For simplicity just do 50/50 with B owing A 94k.

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I think that should be 110k. Pledged capital isnât equity of the flat.

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I think we should not confuse between Share of asset vs. share of equity. as far as i know Mortgage is just a way to finance the purchase.

Total A -: Equity A + Mortgage value A
Total B -: Equity B + Mortgage value B
Total A + Total B = Total value of the asset

Share of A = Total A / (Total A + Total B)
Share of B = 100 - Share of A

Loss/profit are always by share of assets

As far as I get it, you can only pay Mortgage interest 50-50 if Mortgage A = Mortgage B
Otherwise it would be gift from A to B and other taxation issues

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I understand you want to make a contract, but I think it is important to note that the law consider that you are forming a sociĂ©tĂ© simple / einfache Gesellschaft (art. 530 CO/OR). Art 533 CO/OR states that without contract, all the profits will be split 50/50.

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Thanks all for your valuable comments and insights. Looks like we will go for a 50/50 split with internal loan as this seems to be the easiest solution.

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