Buying a Property Together…

 

 

If you are buying the property together, you will each be a co-owner. As co-owners, you can hold the property in one of two ways:

• As ‘joint tenants’
• Or as ‘tenants in common’

“Joint tenants” and “tenants in common” are ways of describing how you own the property: the terms have a different legal meaning to the type of tenant who rents a property from a landlord.

If you are buying a property with someone else, it is advisable to specifically agree each party’s share in the property to avoid future disputes.

 

What does Joint Tenants mean?

If you hold the property as joint tenants, both of you will own the whole of the property. You will not each have a quantified share in the property and will not be able to leave a share of the property in your Will.

If you sell the property, or if you separate, it will be presumed that you both own the property equally. Regardless of your respective contributions to the purchase price.

On the death of one co-owner, their interest in the property would automatically pass to the remaining co-owner, without any further action. The surviving co-owner would then own all the property and on their death, it would form part of their estate. This is known as the “right of survivorship”.

 

How is Tenants in Common different?

If you hold the property as tenants in common, each of you will own a specified share in the property. Therefore, you will need to consider whether each person’s share will be fixed from the outset or whether the shares will vary according to the financial contributions made by each person during your ownership of the property.

If you hold as tenants in common, your share of the property can be passed on to another person. Either during your lifetime or under your Will. If you do not have a Will at the time of your death, then your share will pass in accordance with the rules of intestacy.

 

What should you consider?

In coming to your decision, you should think about the following:

• Do you have children from previous relationships? Would you prefer them to inherit your interest on your death rather than your co-owner?
• Are your financial contributions towards the property going to be unequal? For example, if one person pays a larger deposit or proportion of the mortgage repayments or the costs of any major works to the property, you may want your shares to reflect this.
• Do you want fixed shares? If you opt for fixed shares, your shares may be equal or unequal, but they do not have to be.  Holding the property as tenants in common in unequal shares may be desirable if you have made unequal contributions to the purchase price of the property.
• If your shares are to be fixed, you will need to decide the size of those shares now. You may therefore need to revisit the split if there is a change of circumstances in the future which you want to reflect in the proportions in which you own the property. An example would be if only one of the co-owners pays the costs of significant improvements to the property.

 

What to do?

To avoid future disputes, the agreement reached and your shares in the property should be expressly agreed and recorded in a deed of trust, which will be signed by each owner.  A declaration of trust can also be recorded in the Transfer of the property.

However, in certain circumstances it is advisable for you both to receive independent legal advice, for example when you are making unequal contributions towards the purchase price or because there is an actual or potential conflict of interest.

You should start thinking about joint ownership early on in your transaction so that you can reach an agreement and/or take independent legal advice if required.  You can also  find out more about joint ownership at www.lawsociety.org.uk/support-services/advice/practice-notes/joint-ownership.

 

Post written by Lisa Collett,

March 2019