If you are in a relationship, there’s a chance you are considering setting up home together and buying a property with a partner.
In the UK, cohabiting couples account for the fastest growing type of family, with currently more than 3.4 million couples living together in England and Wales. Of course, not all will be homeowners, as a good percentage will be renting, but owning their own home will be the aspiration of many. It isn’t just couples who consider buying property together. You might be thinking about buying with a friend or relative.
Whatever your particular circumstances, before embarking on buying a property with a partner, it’s important to understand:
While both of you will be the legal owners, you need to decide how the ‘value’ in the property is held. This is known as the beneficial interest. This can be held in one of two ways:
Owning a property as joint tenants
If you own a property with someone else as joint tenants then you both own the legal and beneficial interest in the property. This means in the event that one of you dies, the other automatically inherits the property. It also means you cannot leave your interest in the property to anyone else in your will.
Owning a property as tenants in common
In this case, if you own a property as tenants in common you have a specified share of that property. This may not be an equal share – you may be investing fifty-fifty, or perhaps one of will own three quarters, with the other owning the remaining quarter. You may be investing with more than one person, and have a share each.
In the event that one of you dies, their portion (or your portion, if you have died) passes to the beneficiaries of the will.
Now, if you are a couple it is likely that you will want your share to pass to your partner, but this must be specified in your will. If you don’t have a will, your estate – including your share of the house – passes to whoever is deemed to be your beneficiary. When that person inherits the share of the property, they may decide they want to sell up. This demonstrates how vital it is to make a will if you are buying a property, particularly if you are buying with someone other than a spouse.
It is also strongly advisable to draw up and sign a declaration of trust when buying a property as tenants in common. This sets out the details of the ownership, and can also include information about what you or your partner would like to happen if one or other of you wants to sell.
This depends on your circumstances. Many married couples opt to be joint tenants. However, if you are buying with a partner, and perhaps one of you has contributed more, you may prefer a tenants in common arrangement. It also means you can protect you investment if you were to separate.
What if you are married but you have children from a previous relationship? Here tenants in common may be a consideration, as you may want to pass your share of the property on to your children rather than your spouse. Remember, if you are joint tenants the house automatically passes to your spouse.
If you are tenants in common and you die, and your interest in the property passes to your children, you’ll probably want to ensure your spouse can remain living in the property. In this case, you can leave your spouse a life interest in your share, so they can live there for as long as they wish. However, once sold, your interest in the property passes to the beneficiaries named in your will.
If you own property as joint tenants it is possible to change this into a tenants in common arrangement. Why might you want to do this? Possibly your relationship has broken down and you each want to protect your interest in the property.
It is important to seek legal advice before embarking on this route, as your lawyer will be able to take you through the process of changing the tenancy arrangement.
The mechanism involves first serving a notice of severance of joint tenancy on your co-owner and also registering a restriction on the Land Register, to ensure your co-owner can’t sell, transfer or re-mortgage the property without your involvement. If you have a mortgage, you should also notify your lender about the change from joint tenants to tenants in common.
It’s important to remember that, in the event of death or separation, partners who own a property together have less legal protection than those who are married or in a civil partnership. This is why it is so important to seek professional legal advice when buying property with a partner or friend, and ensuring you have chosen the right tenancy arrangement for your circumstances. Plus, it is essential to have an up-to-date will.
If you are thinking about buying a property with a partner, friend or other family member, then please get in touch with the property lawyers here at Optimum. We help people who are buying and selling homes in Swindon, Cheltenham and the surrounding area, with conveyancing advice.