Buying A House Together – A Reminder Of The Legal Consequences

As property prices seem to rise daily, and the average house price in a city is above £100,000, many people now choose to buy a home jointly with another person.

Whether joint purchasers include civil partners, husband and wife, friends or colleagues, it is important to understand the two different ways property can be held in this country.

If you buy your property as “joint tenants” and one of you dies, the survivor is entitled automatically to the whole value of the property regardless of anything that is in the deceased’s will. However some joint owners would find this option unsuitable.

If, however, you buy as “tenants in common” and one of you dies, the surviving party is not automatically entitled to the whole value of the property. The ownership of the deceased’s share will depend on the wishes in the deceased’s will, or if that person has not make a will then the law relating to intestacy comes into force.

The current high prices mean that many people find it difficult to get a foot on the property ladder, so properties are often bought by a group of friends or families helping each other. For these buyers tenancies in common are often ideal because of the flexibility they offer. The share of a house or flat can be willed to whoever the deceased chooses and not necessarily the other owner. So for people holding property as tenants in common it is important to take time to make a will to ensure their wishes for their property share are quite clear.

There are other points to consider when parties are holding as tenants in common.

Frequently, one person may provide all, or a major part, of the deposit, even if both contribute equally to the monthly mortgage payments. If one person makes a larger contribution towards the deposit on the property purchase, then their larger share of the value of the house can be shown in writing in a “Declaration of Trust”. This Deed provides evidence of the joint purchasers’ intentions as to how their shares in the house should be divided on a sale. It applies equally to registered and non registered property.

As you might imagine, there are many combinations of how tenants in common could own a property. It may be in equal shares, unequal shares, or perhaps one party may receive a fixed sum on sale after a mortgage is paid off. Declarations can include a right of first refusal in the event of sale, and can be as simple or complex as parties wish.

One thing is clear, a Declaration should not be seen as an afterthought following completion. Circumstances may change between joint owners so it is important their intentions are clearly recorded at the time they move in. If you are already tenants in common, and you have not set out the extent of ownership, all is not lost. Provided your co-owner(s) agree, you can sign a Declaration of Trust at any time whilst you own the property.

Whilst the concept of Declarations for joint ownership is not new, recent changes in society mean these Deeds are likely to be more relevant and therefore more widely used

Published 08/05/2007.