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14th November, 2022 by Gemma Evans
Senior Associate at Howes Percival, Gemma Evans, provides some top tips on things to consider when an unmarried couple purchases a property together.
It’s exciting - buying a house together. It’s often considered a sign of commitment; taking that next step. Most people do not want to think about what would happen to the property, or who would continue to live in the house if the relationship breaks down. It’s not very romantic and it’s awkward having that conversation; but be warned, if you don’t, and you don’t take steps to protect your interest, you could be left feeling very sorry for yourself, and substantially worse off financially, if things don’t work out.
If you are buying a house in joint names and each contributing the same financially towards the purchase price of the property you will likely decide to hold the property as joint tenants. This means that if one joint tenant passes away, their share automatically passes to the surviving joint tenant, no matter what is stated in their Will.
If you don’t want this to happen, then you may want to consider holding the property as tenants in common, so you can leave your interest in the property to whomsoever you wish it to go to under the terms of a valid Will. It’s therefore important that you have a Will in place. If you don’t have a Will, then your estate would pass in accordance with the rules of intestacy (where someone dies without a Will).
If you initially purchased as joint tenants and then decided you want to hold as tenants in common you can ‘sever the tenancy’, which is a free and relatively straightforward application made to the Land Registry. If you decide to do this, the other person must receive notice of this. You will then be able to leave your interest in the property under a Will, as mentioned above.
It is not uncommon when couples purchase a property together that one or both people will simultaneously be selling a property owned in their sole name, often having acquired this prior to the relationship. Sometimes one person will have much more equity from the sale of their previous property to put into the new jointly owned property. Alternatively, perhaps one person is being gifted money from parents, sometimes a significant amount, to help purchase the property, and the other person isn’t contributing anything towards the deposit.
So what is the position if one of you is contributing more towards the purchase price of the property than the other? Do you still want to hold the property as joint tenants or if the relationship breaks down and the house is sold, would you want a greater share of the equity, to reflect the extra contribution you had made? In my experience, the answer to that is often ‘yes’.
So what can you do? You can hold the property as tenants in common in unequal shares and ensure that is recorded in the transfer deed when you buy the property. You should also have a separate Declaration of Trust drawn up when you purchase the property, to reflect your respective shares in the property, and make sure you both take independent legal advice on this.
What happens if you paid more towards the purchase price of the property, but you did not take steps to reflect this and protect your interest? The presumption is that you own the property equally. The onus will be upon the person asserting an unequal interest to rebut that presumption, which is likely to be very difficult.
The key point here, is that difficulties can be avoided if there is a formal Declaration of Trust in place, as referred to above.
What is the position if one person wants to sell the house and the other doesn’t? If you can’t agree that the house is to be sold then an application to Court for an Order for Sale can be made. This does not mean that the Court will automatically order an immediate sale of the house, as the Court will consider a number of factors before deciding whether there should be an immediate or deferred sale.
Who gets to stay in the property after separation? As joint legal owners both people have a right of occupation (unless excluded by Court Order or bail conditions are in place preventing this).
To try and minimise disputes arising upon separation, you could also consider having a Cohabitation Agreement drawn up at the time of purchase, so you each have a clear understanding of what would happen to the house if things didn’t work out. It can also detail what the expectations are whilst you are living together in relation to payment of household bills and so forth.
A Cohabitation Agreement is something you should particularly consider if you are moving into a house owned solely by one person – this article does not consider the position where the property is solely owned or what claims may be available on behalf of any children of the family, which will be discussed in separate articles in due course.
For more advice on this issue or any other family law matters, please contact Gemma Evans on 01908 247268 or at firstname.lastname@example.org.
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