Beware when buying property jointly

Buying a house is a major commitment and is usually the largest debt someone will take on in their whole life. For many, buying a house can be a very stressful process. Whether you are a first-time buyer or experienced property investor, there are a few things which should be considered beforehand when buying property with a partner.

How will you hold the title?

The Title Register records who owns the property as well as providing a physical description of the property. It also contains information as to whether the property is subject to a mortgage and who the mortgage is in favour of.

How the property is held is completely up to you.  The main ways to hold the title of your property are:-

1. Joint tenants: holding the title as joint tenants would mean each party is entitled to equal shares of the property. Each party has what is called the ‘right of survivorship’, meaning that in the event of death, the remaining share automatically passes to the survivor.
2. Tenants in common: unlike joint tenants, tenants in common do not benefit from the right of survivorship. Instead, in the event of death, the deceased’s share would pass in accordance with the terms of their Will. Tenants in common can hold the property in equal or specific shares.

What to consider when deciding how to hold the title

1. One party contributes more to the deposit: in this scenario, it may be wise to hold the property as tenants in common, apportioning, for example, according to your percentage contributions.
2. Do you have children from previous relationships: in situations where the purchasers of a property have children from previous relationships, holding the property as tenants in common will see the respective shares pass in accordance with their Will in the event of death so children can benefit.

What happens if we fall out? – Can I force a sale?

If the other party does not agree to the sale then a Court Order is required which is expensive and time consuming.

If your co-owner does not meet their contributions to any mortgage then you are faced with the issue of having to pay the mortgage yourself or face arrears building up, which will severely affect your credit rating.  Ultimately the property could be repossessed if the arrears become significant and this could ruin your chance of home ownership in the future.  Or you may want to move on and buy a home of your own but cannot until you are released from the joint mortgage.

What can I do to protect myself?

If you are married or in a civil partnership and the partnership breaks down then any property owned by either of you will be dealt with as part of the dissolution of the marriage or civil partnership and there is law dealing with this.  However, if you are moving in with a partner or buying property with another as an investment, then a Declaration of Trust or Co-habitation Agreement is recommended.

What is a Declaration of Trust?

A Declaration of Trust is a legal document confirming the terms on which a property is held. The document sets out the portions of the ownership of the property, as well as any other terms agreed by the parties.

A Declaration of Trust is put in place to protect each parties interest in a property by ensuring each party gets what they are entitled to as per the terms of the trust, and helps avoid any confusion as to the shares and general ownership of the property should things not go to plan.

It is completely up to you what you’d like to include in your Declaration of Trust but ultimately, it is there to protect you, and can reduce the inconvenience and emotional stress of negotiating and agreeing the sale of a property.  It can include the option for one party to buy out the other party or agree terms for a sale in the event one party wishes to do so.

What is a Cohabitation Agreement and why should you get one?

A cohabitation agreement can be used to set out the ownership of existing assets as well as your new home and covers elements such as:

• General ownership of your property
• The deposit on your home
• The amount of mortgage you will pay
• How household bills will be dealt with
• Other assets such as cars and furniture
• Payment of debts

Each cohabitation agreement is different and depends on your individual circumstances. It is important to also consider any property you owned before moving in with your new partner. A cohabitation agreement can be used to keep this separate and prevent the other party from having a claim over it should things not go as planned.

Many couples assume that as they are living together but are not married or in a civil partnership, ‘common law marriage’ protects them in the same way as married couples. However, it is important to remember that this is not the case and no such law exists.

Considering all your options as an unmarried couple can help provide peace of mind in your relationship, and coming to an agreement before or even whilst you are living together will help you have a clearer understanding of what your financial commitments are and how you will deal with your assets upon a breakdown of your relationship.

We can help

As well as assisting you with the acquisition of your property we can draw up a Declaration of Trust or Co-habitation Agreement to give you peace of mind.  Call Loretta Hales or Lisa Bourbonneux in our Residential Conveyancing team on 01543 420000 or e-mail info@keelys.co.uk for a free quotation.