The days when homes were predominantly bought by married couples are long gone. Joint ownership with partners, friends and family members is becoming more common, partly because more people get married later in their relationship or not at all.
The other driver is the sheer difficulty most people face getting onto the property ladder. Even modest ‘starter homes’ are beyond the means of most individuals.
However sharing the cost means sharing the ownership and there are risks you need to understand and protect yourself against. You can’t just assume that somebody will do the reasonable and fair thing if the relationship breaks down or one of the co-owners is suddenly unable to pay their way. Unfortunately, when money and property are at stake conflict can arise.
Types of Joint Ownership
In English law there are two types of joint ownership. You can either be tenants in common or joint tenants.
As joint tenants, you both own the whole of the property. You cannot leave your interest in the property to whoever you want in your will, it will automatically pass to the other joint tenant. This type of arrangement is most common for married couples and partners.
As tenants in common, you each own a share of the property. This is the normal arrangement if a group of friends buy a property together or if family members agree to buy a share. Tenants in common can leave their share to whoever they like in their will. Some married couples use this arrangement to ensure that their share of the property is put into trust for their children should they die.
With both types of tenancy, all partners have to agree if the property is to be sold. In all probability you will also need to have a joint mortgage. It’s theoretically possible for tenants in common to have an individual mortgage just for their share, but few lenders will lend money on this basis.
Deed of Trust
A deed of trust is also known as a declaration of trust. It is highly recommended that you have this in place if you are buying property with friends or family or if one of the partners is making a significantly higher financial contribution.
The deed can include how much money each joint owner paid towards a deposit. It can also set out what should happen if the relationship breaks down, one person is unable to pay their share of the mortgage or you want to sell the property. It takes the risk, uncertainty and reliance on other people acting honourably out of the arrangement.
Depending on your circumstances, there are different choices you might want to take when buying property with other people. If you have any questions, the property team at PowellsLaw will be happy to help. You can contact us here for more information and professional advice.