Buying a house with your partner?

Buying a property with your partner is exciting but a big commitment. Moreover, it’s not usually a step you take if you don’t know each other well. After all, getting onto the property ladder isn’t always easy or cheap. So, once you’ve agreed on the area, type of house and your budget, it’s best to ensure you’re fully informed before proceeding.

Owning a Property Together

First and foremost, you need to decide which type of ownership you want. In England and Wales, unmarried couples who buy a property together have different legal rights to those who are married. In addition, the law affects an unmarried property owner’s rights when the relationship ends, or their partner dies.

There are two ways you can buy a property together:

1. As Joint Tenants

This means that the property is bought and owned jointly. Therefore, each person owns an equal share of the property.

Before you proceed with this option, you should consider the following:

• If one of you dies, the property (and mortgage) will automatically pass to the surviving owner. This is known as the ‘Rule of Survivorship’. The surviving owner will then be responsible for paying off the remainder of any mortgage debt.
• Your partner may already own a property or have cash in the bank. However, if only one of you needs a mortgage, you must take a joint mortgage together.

Your Rights

As a joint owner, both you and your partner:

• have an equal right to stay in the property;
• have an equal right to return if ever you move out;
• cannot evict your partner (or change the locks);
• need the consent and signature of the other to sell the property;
• require the approval and signature of the other to raise a mortgage or loan against the property.

Note:

Life insurance is a must if you buy your property as joint tenants. If one of you becomes ill, unemployed or dies, the other person won’t be responsible for the outstanding debt.

2. As Tenants in Common

In contrast to a joint tenancy, Tenants in Common means that each owner doesn’t have to own equal shares of the property. So, if you would prefer to keep your interest in the property completely separate, purchasing the property as Tenants in Common may be better.

Points to consider:

• This agreement can be entered into by up to four people (friends or relatives, or a combination);
• If you earn more than your partner, you could agree (in writing) that you will pay more towards the house and have a more significant share;
• Since each owner can act individually, the ‘Rule of Survivorship’ does not apply. This means that each property owner is free to leave their share of the property to whoever they choose in their will;
• If no will exists, the rules of Intestacy will apply, so make sure wills are in place.
• Inheritance tax could still be payable (unless the co-owners are married or in a civil partnership).
• Co-tenants are allowed to mortgage their share of the property. However, finding a willing lender in practice might be difficult as the lender wouldn’t be able to repossess the property as other owners are involved.
• Naturally, not everyone’s circumstances are the same. So it’s essential to work out the agreed share of equity at the outset, ensuring you enter into the most relevant agreement. If you are in any doubt, your conveyancer or solicitor will be able to help.

Trust Deed

This is also known as a Declaration of Trust, which outlines each person’s understanding of how the property is to be held. It provides an expectation of what would happen should there be a disagreement in later years. The agreement would:

• Help protect the amount you have put into the property (vital if you are contributing different amounts)
• explain what happens if one of you stops paying the mortgage
• set out what happens if one or both of you wants to sell the property
• define what happens if you want to end the agreement
• specify how much notice you need to give to terminate the agreement

Note:

Irrespective of which way you decide to own the property, you should make Wills to ensure that your wishes are carried out in case of one or more owners passing away.

Our Advice

Buying a house together can take it out of you – financially and emotionally. However, seeking professional advice early can save you time and money in the long run. An independent advisor can help you think through your actions’ implications, ensuring the documentation is fit for purpose. Particularly important if your circumstances aren’t straightforward.

For further information on buying a property together, please contact us; we’re here to help.

Please note that all views, comments or opinions expressed are for information only and do not constitute and should not be interpreted as being comprehensive or as giving legal advice. No one should seek to rely or act upon, or refrain from acting upon, the views, comments or opinions expressed herein without first obtaining specialist, professional or independent advice. While every effort has been made to ensure accuracy, Curtis Parkinson cannot be held liable for any errors, omissions or inaccuracies.

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