What you need to know when buying a home with a partner or friend
Buying a property with someone is an exciting venture, but just as with any financial investment, there are things you should know in order to protect yourself.
Here’s what you need to know when buying a home with a partner or friend.
What are my tenancy options?
Put simply, your two options are to enter into either a joint tenancy or a tenancy in common.
A joint tenancy is one in which buyers are viewed as one, with equal shares and rights. With a tenancy in common, buyers can own individual shares in the property of differing values.
Here is how this relates to buying with both a partner, and with a friend or friends.
Buying with a partner
The usual procedure here is to own the property under a joint tenancy, so that you not only own the property together, but should one of you die, full ownership is automatically passed to your partner.
This is known as a ‘right of survivorship’, and means your partner can’t stipulate in their will that their share of the house should go to someone else.
You cannot re-mortgage your share of a joint tenancy, and can’t sell without the agreement of your partner. Also, in the eyes of the law, you have the right to stay in your home unless the courts intervene and decide otherwise.
If your relationship breaks down and the mortgage is in both your names, it’s worth noting that you will still legally own your home together unless you sever the joint tenancy you share.
If one of you moves out, buys another house, begins a new relationship – they will still share the property with you, so severing it should be a priority if you no longer plan a future together.
The gov.uk website states that if you want to change the type of tenancy you hold (i.e. your joint tenancy to a tenancy in common), you can do so at any time, free of charge.
What’s a cohabitation agreement, and do my partner and I need one?
If you’re married or in a civil partnership, the law offers you greater financial protection when you live together. So if you’re unmarried and things break down, there is more chance of confusion over the assets you share – and if your mortgage is held in only one of your names, this can complicate matters.
This is where a cohabitation agreement can be especially sensible, as it not only defines what would happen if you separated, but also sets out who is accountable for debts, who owns what share of the property and who is responsible for bills and the upkeep of your home. It may seem unromantic, but clarifying things can actually take the pressure off both of you.
If you are buying with a friend and would like to know more about cohabitation agreements - call us on 0800 612 7456 or get a conveyancing quote online.
Buying with a friend, or friends
If you’re buying with a friend or in a group, a tenancy in common could be your best option; up to four people can enter into it on one property.
A tenancy in common allows you to own unequal shares in the property, so that the person who contributes the most can own the most. Each share is also independent of the rest, meaning each buyer can sell their share, re-mortgage it or leave it to someone in their will.
This comes with the flexibility you may be looking for if buying with a friend, but remember that you are still jointly liable for the mortgage repayments. If one of you defaults and leaves the remaining partners in the lurch, you could all end up with a black mark on your credit rating.
What’s a declaration of trust, and do we need one?
A declaration of trust is a legally binding document which sets out who owns what portion of your property, so that if the situation breaks up you don’t have to go through the (expensive) court process in order to ascertain who is entitled to what on selling the property. This is certainly worth looking into in a situation where a group of people have varying financial shares.
So in summary, be prepared…
Do your homework, get legal advice from a conveyancing solicitor and make sure your expectations are the same as those of the person or people you’re buying with, before you sign on the dotted line. Being financially practical needn’t take the joy out of the process, but rather give everyone in the situation peace of mind.