When you buy a property with one or more other people you have to make a decision on how you will own the property. It will be either as joint tenants or tenants in common.
Ignore the reference to tenants. It bears no relation to the term tenants who rent a property.
Should you decide to hold the property as joint tenants this means that the ultimate survivor of the owners will become the sole owner of the whole of the property even though one or more of the owners indicates otherwise in a will. Wishes in the will relating to the property will be overridden by a joint tenancy.
Holding the property as tenants in common means that you and the other owners will own the property in either equal or unequal shares. Each of the owners‚Äô shares in the property will upon their individual deaths go to whoever is entitled to that person‚Äôs estate under their will or the rules of intestacy where they do not make a will.
Most people in their first marriage or civil partnership who have contributed equally to the purchase price of a property choose joint tenants and if either of them die the survivor will become the sole owner without any document having to be drawn up but you do not have to be married or a civil partner to own a property jointly with someone else. However, should the relationship break down any one of the owners can give a legal notice to the other to sever the joint tenancy. If this is done, unless there is any compelling evidence to the contrary, it will be difficult to argue that the owners hold the equity in the property in anything other than equal shares.
No one likes to start off in a relationship thinking the worse but you have to be realistic. You may be buying a property and living with someone else for the first time. Living together as partners is totally different than being away together for two weeks in the sun.
Living away from your parents for the first time may mean you are having to pay mortgage, council tax, water rates, gas, electric and other utility bills as well as feeding yourself. ¬†These all mount up and you may not have the same amount of money to spend on going out enjoying yourself. This can cause friction between partners and if the partnership then deteriorates each of the partners may blame each other for any subsequent breakup.
Should the problems with the relationship not be resolved one of the parties may want to realise their interest in the property. This can only be resolved by one of the parties paying the other for their interest in the property or if this is not possible because neither party can afford to do so or able to pay the mortgage alone, the only solution may be for the property to be sold and after the repayment of the mortgage and the costs involved in the sale the balance will then be divided equally between the owners or if the property is in negative equity contribute to the balance to fully pay off the mortgage.
It is at this point should there be equity in the property that one of the parties may claim they should be entitled to more of the proceeds of sale than the other as they may argue they have paid more towards the purchase of the property or the mortgage or the outgoings. This is not usually an argument that in itself will justify one partner being entitled to receive more than the other. The circumstances as a whole will be taken into account and the reason the property was purchased jointly. If any one of the joint owners refuses to agree to a transfer of the property or to sell the property any of the others owners can apply for a court order to determine the share each person is entitled to and if necessary make an order for the property to be sold. However, this may not be possible if there are children of the relationship living at the property. Try to avoid court proceedings at all cost.
Is there a solution? Yes. When the property is being purchased ask your conveyancer to draw up a separate document to identify if one of you is making more of a contribution than the other towards the deposit or mortgage payments and what will happen should the relationship break down. This may initially cost you about ¬£150-¬£200 plus VAT but this would be a cheap price to pay as the cost of arguing backwards and forwards when there may be bitterness between the joint owners and you may be emotionally vulnerable and distressed can run into several hundreds of pounds and even more if any court proceedings are instigated.
This is not meant to be doom and gloom on relationships but please think carefully what can happen in the long term and decide on your agreement whilst you are still friends.
Another matter you need to consider when owing a property jointly as tenants in common is making a will by which you can indicate who you wish to receive your share of the property when you die and should your circumstances change it is far easier to change a will than become involved in a protracted argument
Take time to decide which the best option for you is. Here at Morecrofts our experienced property and private client teams will be happy to provide you with any information you need to help you reach a decision.