Joint property ownership: Buyers beware
A chronic shortage of housing stock combined with increased levels of employment has put the housing sector under stress, driving already inflated prices sky high. For many, joint property ownership with a partner, family member or friend is the only way onto the housing ladder, but is it that simple?
“Many people see joint property ownership as their only way onto the housing ladder. Increasingly family members and friends are buying together as well as unmarried couples. While this can make excellent financial sense at the outset, without the correct agreements in place, it can prove a costly mistake should you part ways or fall out.”
Chun says that the increase in the variety of joint ownership arrangements comes with an increase in the number of disputes, “people don’t always go into these decisions with their eyes wide open, preferring not to think about the future just the here and now but the reality is that families fall out, relationships break down and friendships dwindle and this is where the problems start.”
Therefore, she advises those who are purchasing a property together and who aren’t married to consider the below:
The Legal Title:
As a starting point, it’s vital to ensure all parties are agreed as to who should be named on the legal title document. If a dispute over ownership or division of the assets of sale makes it to the courts, they will often look to see who is named on the official legal title – this is always the starting point. If you’re not named, you won’t be recognised by the law unless you can prove to the contrary which is often a long and expensive process. If it’s jointly named, then it won’t matter who put up the deposit, or how the mortgage was paid, each party will receive an equal share, unless you can prove to the contrary.
Deed of declaration:
A solicitor can draw up a deed of declaration for joint purchasers. This legal document will clearly outline if there is an unequal share in the property or who the actual owner is. For example, if only one person put up the deposit and wants to protect that investment, or if one person pays a larger percentage of the mortgage and so wants a larger stake in the property. An unequal contribution or intention of unequal distribution should be recorded in writing. The document may cost in the region of £500 + VAT to draw up, but will be well worth it in the long run.
How do you own?
If buying a property with someone, there are generally two recognised arrangements – ‘joint tenants’ or ‘tenants in common’. It may seem like a small technicality, but in the case of wanting to part ways it could make all the difference.
For joint tenants if one of you dies your share automatically passes to the other person. For tenants in common if one of you dies your share will be divided according to a will. If there is no will, the rules of intestacy will apply and the share will pass automatically to their next of kin which wouldn’t be a partner that you aren’t married to.
Your conveyancing solicitor should ask what arrangement you want to purchase the property under, but the default position is as joint tenants. If this is not the route you want to go down, you must tell your solicitor.
Chun says: “There are many misconceptions about how the law works, one is the notion of a common law partner. This doesn’t actually exist within the law. Unfortunately, if you are not married, and don’t have the correct documents drawn up, in the eyes of the law you are not entitled to anything. This can often come as a huge blow to people at what is often a difficult time such as a break up or a death, and to think that on top of this you could also be made homeless.”.
“Equally, I have had clients who have had decisions made early on in relationships come back to haunt them. One married client with a young baby wanted to sell his house and buy another property. Unfortunately, he was unable to do so, as the other name on the title deed of the property was a girlfriend from years before, who had subsequently moved abroad.
“We had to track down this former girlfriend, who then wanted a share of the property sale, despite her not having had anything to do with the property for over 10 years. Eventually a nuisance payment of £10,000 was agreed upon for her to sign her name away. An expensive mistake and needless to say, his wife was not impressed!”
For further information, please contact:
Lizzie Hannaway at Black Letter Communications
020 3567 1208
Notes for Editors
Hodge Jones and Allen
- Hodge Jones and Allen is one of the UK’s most progressive law firms, renowned for doing things differently and fighting injustice. Its managing partner is Patrick Allen, recently awarded a lifetime achievement award by Solicitors Journal.
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