Buying a property together?

Dhariwal, Solicitor and Managing Director of Lawcomm, explains the important legal considerations

According to the Office for National Statistics, cohabitation is the fastest growing family structure. The number of cohabiting couples has grown by almost 23% in the past decade.

However, couples who live together without being married have very few legal rights. In England and Wales, there is no legal concept of common law husband or wife. Accordingly, unmarried couples are exposed to various risks should their relationships breakdown.

In order to avoid a painful and costly separation, it is useful to have a grown-up conversation about cohabiting and enter into essential legal documents before you buy a property together.

1 WHAT SHOULD WE CONSIDER?

Buying a home together is a huge step. For many, it will be the single biggest financial commitment they will undertake. Apart from choosing your home you will need to consider how you will raise the deposit and pay the monthly mortgage payments, bills and maintenance costs. You will need to decide whether contributions will be made equally and, if not equally, whether any adjustments will need to be made to reflect any unequal contributions.

In terms of mortgages, you will need to decide whether you obtain a joint mortgage or, where one of you may have impaired credit, whether the mortgage should be in a sole name.

Importantly, you need to decide on what will happen if your relationship ends.

2 HOW SHOULD WE OWN OUR PROPERTY?

There are various ways of holding property in England and Wales. You will need to decide which is the most appropriate before you purchase:

Joint Tenants – This is the most common form of joint ownership. Joint tenants means that a couple will be deemed to own the property in equal shares, regardless of how much each has contributed towards

And What Documents You Will Need

the deposit, maintenance or the monthly mortgage payments. It also means that should either die, their share would pass to the other party regardless of whatever was contained in a Will. This is called the “right of survivorship”.

Tenants in Common – This means that each person holds a distinct share in the property. This could be equal but it also enables couples to allocate unequal shares between them. For example, where one person pays the entire deposit they may wish to ensure that they ringfence that contribution with the rest of the equity being divided equally to reflect equal mortgage payments. There is no right of survivorship, so it is recommended that Wills are drafted to ensure that shares are passed as intended on death.

Express Trust – Where a property cannot be purchased in joint names, for example, where one person is unable to obtain a mortgage, it may be possible to buy the property in the name of one party but for there to be a written trust deed setting out that the equity in the property is owned by the couple jointly, either in equal shares or as otherwise agreed.

3 WHAT OTHER LEGAL DOCUMENTS MIGHT HELP?

Cohabitation Agreements – These agreements are sometimes called living together agreements. They act like “prenuptial agreements” in a marriage context. These agreements set out who owns what and in what proportion. Couples have the freedom to decide how they intend to split their property and assets should the relationship end. The agreements are flexible and can even record how the couple want the relationship to work and who will pay the mortgage, the holidays or renovations to the property. They can also cover whether a couple take out life insurance, make Wills, deal with their own separate debts and make arrangements in relation to joint bank accounts.

Wills – If a person dies without leaving a Will (called dying “intestate”), there are specific rules governing estate distribution.

Unmarried couples are not recognised in the same way as family members under the intestacy rules. The only way for an unmarried partner to inherit is under a properly prepared Will. It is therefore essential that unmarried couples obtain Wills and keep these updated.

Declarations of Trust – These documents set out who provided what towards the purchase price and the proportions they will each receive upon sale. Extracting money out of a jointly purchased property will be easier if there is a clear, legally prepared Declaration of Trust agreed by both parties. Rather than have the cost and heartache of sorting a significant mess out in the event of a relationship ending, Cohabitation Agreements, Wills and Declarations of Trust can help save acrimony and legal costs should the relationship fall apart.

For further information regarding buying a property, please email Bill Dhariwal of Lawcomm Solicitors on bill.dhariwal@lawcomm.co.uk, call 01489 864 117 or visit lawcomm.co.uk