GET IT RIGHT FIRST TIME: Sarah is here to help first time buyers get to grips with the conveyancing process. This month she explains how co-ownership works when you’re not married…
I am buying my first house with my boyfriend and my solicitor has asked how we wish to own the property. What does this mean?
If you are buying a house with other people, how you split the ownership is a key consideration. If you are intending to hold it in joint names, your solicitor will need to advise the Land Registry.
There are two options for co-ownership that need to be considered. They are old expressions, called ‘joint tenants’ and ‘tenants in common.’ In more recent usage, the word ‘tenant’ denotes someone who is renting a property, but in this context, it refers to the manner in which you own it.
Choosing the option that best suits your personal circumstances is crucial, as it may determine what will happen to the property if one of you dies or you decide to separate. To avoid any issues arising at a later stage, it is important, therefore, to consider how much you and your partner are contributing to the purchase and how you wish your share to be reflected moving forward.
When you buy as joint tenants, you each have an interest in the whole property and if one of you dies, your share passes to the survivor. This is known as ‘right of survivorship.’
Any interest you have in the property terminates on death, even if a will has been made, i.e. you cannot pass on any share of a property you own as a joint tenant.
Tenants in common
This tends to be the most usual type of ownership for unmarried couples, friends and business partners buying property together. As tenants in common, you each have a specific share and if you decide to sell up, the proceeds will be divided accordingly.
This option is particularly suitable if you and your partner are investing different amounts of money in the purchase, as it can be reflected in the proportion you own. However, if one of you dies, your share does not automatically pass to the survivor. If you want your partner to be able to continue living in the property, it is extremely important to make wills leaving your shares to each other.
If you are contributing equal shares to the purchase, you should also consider entering into a separate document, known as a ‘declaration of trust,’ that covers what will become of the property if something happens to your interest or it is sold.
A declaration of trust
Sometimes known as a ‘trust deed,’ this is legally binding and should be recorded against the title of your property.
It notes the arrangement between anyone with a financial interest and can include details such as how much each person contributed to the deposit, how much will be repaid, the percentages of the property owned and how the money will be divided when it is sold.
If you have a mortgage and you contribute unequally to the repayments, the declaration of trust can include what each person pays and how the loan will be disbursed. It may also be appropriate, if you have money loaned or gifted to you by parents, to detail this, ensuring it does not pass to the joint owner, but back to your family if the property is sold.
If you are a first-time buyer with a question about moving home, our residential property expert, Sarah Gaunt, would love to hear from you. Email: firstname.lastname@example.org