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Home ownership is a tricky business – and especially if you’re buying a property with someone else.
We’ve all heard the stories of joint property ventures going wrong – whether as a result of a break-up, bereavement – or some other reason.
Despite this, complicated joint property partnerships are on the increase – but why is this?
First off, more and more people are now cohabiting without tying the knot – with figures from the Office for National Statistics showing the number of unmarried couples living together in UK has soared in the past 20 years, from 1.5 million in 1996 to 3.3 million last year.
Secondly, with house prices heading upwards, we are now seeing a growing trend of people clubbing together with friends so they can take the first step.
But no matter whether you are planning to buy with your husband, wife, boyfriend, girlfriend, sibling, parents – or a bunch of mates – it is vital to establish at the outset how the property is owned.
By deciding what type of legal ownership structure is best for you – and anticipating problems – you can save a lot of time, money, heartache and stress, further down the line.
Types of ownership
Jointly owning a property means you can’t be forced to leave without a court order.
It also means the property can’t be sold without your agreement.
There are two types of joint ownership of property: “joint tenants” and “tenants in common.”
Here we take a closer look.
If you buy as joint tenants, this means you own 100% of the property together.
In other words, you have an equal share of the place, and equal rights over it – no matter what you individually contributed in terms of a deposit.
Joint tenants have to act as a single owner, and will need to remortgage the value of the whole property at the same time.
If you sell the property, you are each entitled to half the sale proceeds, regardless of how much you each contributed to the purchase price or mortgage repayments.
Neither of you has a separate share in the property which can be sold.
Who is best suited to this arrangement?
Married couples and people in civil partnerships usually buy as joint tenants.
With this set-up, everything transfers automatically to the surviving spouse on the death of the first partner – irrespective of the terms of any will or intestacy.
Put another way, if a husband dies, their share automatically passes to the wife and will not form part of his estate.
This type of ownership is ideal for couples who wish to leave property to each other when they die.
On the downside, if you enter into this type of agreement and have children from a previous marriage or relationship, it could mean that when you die, your children will not inherit a share of that property.
Tenants in common
If you purchase a home as tenants in common, you each own a share of the property – and this is kept separate and distinct from the other owner.
With this type of ownership, you don’t necessarily have to have equal shares.
And, when you die, the property doesn’t automatically go to the other owner. Your share of the property will form part of your estate, and you can leave your share as you wish – as directed by your will.
If you don’t have a will, your share passes to your next of kin (according to rules known as the “Rules of Intestacy”). For more information visit Gov.uk/inherits-someone-dies-without-will
Who is best suited to this arrangement?
Couples who are cohabiting – but not married – normally buy as tenants in common. You do this using a Declaration of Trust (see below).
This agreement will suit people who wish to own property jointly with their partner – but wish to leave their share to someone else when they die.
It will also suit those who have children from a previous marriage, as they can guarantee their children will benefit from their estate after their death – as long as they have written a will.
Buying with friends
If you are thinking about clubbing together with friends to buy your first home, you need to understand exactly what you’re getting into.
Up to four people can be registered as legal co-owners of a property, but one of the most important considerations is how to structure the purchase.
While multiple owners can be registered as joint tenants or tenants in common, the latter arrangement is the most popular, as this means you can safeguard the investment you put into the property by listing who owns which share.
Setting yourselves up as tenants in common can also be a good way to avoid disputes and arguments with friends.
This type of ownership also makes good sense if you are buying with relatives.
Draw up a Declaration of Trust
If you decide to register as owners in common, it is strongly recommended that the precise agreement between you and the co-owner – or co-owners – is documented by a solicitor in a formal Declaration of Trust.
This is particularly important if you are not contributing the same amount of cash towards the deposit, mortgage and other expenses.
A Declaration of Trust is a legally binding document that records the financial arrangements between the owners. It will set out details of contributions towards the deposit, stamp duty and legal fees – as well as how much each individual is paying each month towards the mortgage and other bills and expenses.
It will also record how the profits on sale are to be distributed.
Once you’ve drawn up this Declaration of Trust, you must remember to update it regularly to reflect any change in the co-owner circumstances.
Partner moving in to your existing home
If you have bought a property on your home, but a partner then moves in a little further down the line, a Declaration of Trust can once again be useful.
As your partner may end up contributing towards the cost of the property through bills and upkeep – rather than monthly mortgage repayments – this document can set out exactly who has paid for what.
This can prove invaluable in the event of a break-up.
Parents purchasing a property with a child
It may also make sense to draw up a Declaration of Trust if parents put money into a jointly-owned property with their son or daughter.
This will make proceedings a lot simpler when they decide they want to withdraw their share.
Do 'tenants in common' or 'joint tenants' arrangements exist for home-owners in Scotland?
Melanie Bien, property expert, says: "In Scotland, the situation is slightly different. They don't have terms such as 'joint tenants' and 'tenants in common' but the law is similar. A cohabiting couple can hold a property in joint names and state in the title deed that each of them leaves it to the other when one of them dies".
Changing the joint ownership agreement
It is possible to change to the type of legal ownership of your home.
For information on changing from joint tenants to tenants in common, visit Gov.uk/joint-property-ownership/change-from-joint-tenants-to-tenants-in-common.
For information on changing from tenants in common to joint tenants, visit
Ending joint ownership
If you own a property jointly with another person – or group of people – you all have equal rights to live there.
If someone wants to sell, then everyone needs to agree.
This can get problematic if you and your partner decide to go your separate ways, or if one person needs to relocate for a new job, or some other change in circumstance.
To avoid stress and expense further down the line, it is once again worth drawing up a legal agreement – such as a Declaration of Trust – at the outset which sets out what would happen if one person wants to sell, how much notice is needed, and what share of the sale proceeds each owner is entitled to.
Each person should take independent legal advice on this.
To find a solicitor visit http://solicitors.lawsociety.org.uk/.