Increasing numbers of house-buyers are banding together with friends and family to get on the property ladder – combining capital for a deposit or sharing a larger house in order to split the costs and bills. But how do you ensure that your investment is protected down the line if one of you decides to move out, wants to cash in their share, or causes a dispute?
First things first, seek the advice of your solicitor who can help you put together the legal documents required to protect your interests and ensure a fair outcome – even if you end up falling out with your housemates in the future. Legal advice is equally important for unmarried couples as well as friends and family entering into a purchase together, since cohabiting couples do not automatically have the same rights as married couples when it comes to dividing up assets after separation.
To buy a property with friends or family members, or if you are an unmarried couple, you will need a solicitor to draw up a Declaration of Trust which details how you would like to divide the investment between you. You may also wish to arrange a cohabitation agreement which can provide further details of your joint ownership.
If you jointly purchase a property without any safeguards in place, you may find that you do not receive a fair representation of your investment in the future, as the property will be equally divided between its owners, regardless of what you have each contributed.
There are two main ways to jointly own a property: as Joint Tenants or Tenants in Common.
If you buy a property as Joint Tenants this means you own equal shares, and your individual share will pass on to the surviving owners in the event of your death. Joint tenancy is best suited to couples, though you may prefer to choose to invest as Tenants in Common if one of you has made greater contributions to purchasing, maintaining or improving the property.
Tenants in Common each have a specific share in a property which is detailed in a Declaration of Trust. Often this is based on how much each person contributes to the deposit, mortgage, upkeep, or costs of the property. Shares are not automatically transferred to other tenants in the event of death, so it’s important that each tenant details their assets in an up-to-date will, detailing who they would like their portion to be passed onto.
A Declaration of Trust is essential for Tenants in Common in order to set down the details of each person’s share and investment, as well as the division of day-to-day expenses, and what to do if one of you decides to move out or wants to sell up. It’s also possible to arrange a ‘floating’ arrangement of shares if you expect your contributions or circumstances to change or fluctuate in the future.
Before you invest in property with others, it’s important to come to an agreement on every aspect of living or buying together. Certain aspects of this will be covered in your Declaration of Trust, but a cohabitation agreement is also a useful document to have in addition, and will lay out your intentions for sharing your new home. For example: how you plan on covering mortgage payments if a tenant finds themselves out of work; how you will divide up bills and unexpected repair bills; who is responsible for decoration and cleaning, and whatever else is important to you as co-tenants!
For advice on purchasing property with your partner, friends or family, speak to the experienced property and conveyancing team at Frances Lindsay & Co. We have over 50 years’ of experience in the Berkshire and Buckinghamshire area and can get you started on your property search with a free online conveyancing quote!Tags: property and conveyancing, property and conveyancing Beaconsfield, property and conveyancing Berkshire