If you are thinking of buying a house with a partner, you need to be aware of the different ways of jointly owning a property and the legal implications.
You might be buying with your spouse or partner or with a friend or relative, but whatever your relationship, you should make sure that you choose the right method of ownership and that your rights and interests are protected.
The two methods of joint ownership are:
If you own a property with someone else as joint tenants, you both own the whole property. If one of you should die, the other automatically owns the entire property. You do not own a specified share of the property and you cannot leave your interest in the property to anyone in your Will.
If you own a property as tenants in common with someone else, each of you will own a specified share of the property. It does not have to be an equal share, so one of you could own three quarters while the other owns one quarter.
Any property owned by you as a tenant in common will pass under the terms of your Will. This means that it is important to ensure you and your co-owner have valid Wills in place. Without a Will, you could find yourself in a difficult position if the other owner were to die and someone else inherited their share as they might decide to sell the property.
You are also advised to sign a declaration of trust when buying a property as tenants in common, which will set out the details of your ownership and can also include any agreement you have made with your co-owner over what might happen if someone wants to sell.
Many married couples choose to own their home as joint tenants. For unmarried couples where one person has contributed more towards the purchase price than the other, you may wish to choose the tenants in common option. This means that you can protect the money you have put into the property in the event that you were to separate.
If you are married but you have children from a previous relationship, you should also consider owning as tenants in common. This will give you the opportunity to pass your share of your property on to your children when the time comes.
If you own a property as joint tenants, then on your death it would automatically pass to the other joint owner, your spouse. Even if they have made a Will including your children, it is open to them to change that in the future. They could also remarry, in which case, their Will would automatically become invalid.
There is also a risk that they could spend or lose the money, for example, in a bad investment or in paying for care home fees. If you own your shared property as tenants in common, you can leave your spouse a life interest in your share of your home, so that they can live there for as long as they want, but once they no longer need the property and it is sold, your share would pass to the beneficiaries named in your Will.
If you own a property as joint tenants, you may wish to change to ownership as tenants in common. This could be because of a relationship breakdown, to protect your interest in the property from your co-owner’s creditors or for estate planning purposes.
The best way to deal with this is to serve a notice of severance of joint tenancy on the other owner. If you are considering doing this, you are advised to seek legal advice from a property solicitor to ensure that you follow the right procedure. If you have a joint tenant’s mortgage, you will also need to notify your lender of the severance.
Once the notice of severance has been served, you should also register a restriction on the Land Register. This means that your co-owner will not be able to sell, transfer or re-mortgage the property without you or your personal representative or attorney also entering into the transaction.
The law treats married and unmarried couples differently, so you also need to be aware of the legal position for your own particular circumstances.
If you are not married, you have few rights to claim a share in a property if you separate unless you own a share of it. This means that if you live in your partner’s home and you split up, you could end up with nothing, even if you have contributed towards mortgage payments.
If you are in this situation, you should take legal advice about protecting your rights. Where you agreed with your co-owner that you are to have an interest in the property, you may be able to make a claim for this, but it is not an easy process and it is far better to protect your interest clearly from the start.
Unmarried couples may choose to enter into a cohabitation agreement when buying a property together. While this does not affect the type of ownership you hold, it can simplify matters, should you separate and also avoid misunderstandings and disagreements while you are together.
The agreement can include whatever you want, but will commonly address the following:
Provided the agreement has been properly drafted and you have both taken independent legal advice before signing and fully disclosed your financial positions to each other, the court is likely to follow the terms of a cohabitation agreement, if asked to make a ruling.
If you are buying a property with friends or a companion whom you are not in a romantic relationship with, you should take steps to formalise the agreement you have with them. This will reduce the risk of them being able to make a claim against your estate, if anything were to happen to you.
The Inheritance (Provision for Family and Dependants) Act 1975 allows individuals who have been supported by someone who has died to make a financial claim against their estate.
By entering into a written agreement detailing the nature of your understanding with the other person and who will be responsible for mortgage payments and bills, your estate will be best placed to defend any claim. You may also want to carry out a credit check to ensure you are not buying a property with someone who has a poor credit record.
For more details about the buying and selling process, request our free conveyancing and property guide.
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