Guide to Buying Together
Are you considering buying a property with a friend or partner? Before you decide to buy together, there are a number of things that you need to consider.
For instance, what type of joint ownership purchase are you interested in, and what will happen if your relationship breaks down?
Within this guide to buying together, you will discover everything you need to know, including…
- How to decide to buy together
- Joint tenants
- Tenants in common
- Can tenants in common take out a joint mortgage?
- Changing the type of ownership
- How to transfer ownership into joint names
- Who has rights to the property if the relationship breaks down?
How to decide to buy together
It’s important to think carefully before deciding to buy a property with someone else. It is possible to have up to four legal co-owners of a property, and this can leave a lot of room for miscommunication, mistakes, and regrets.
Before deciding to purchase a property together, you should discuss the following questions…
- How will ownership of the property be split? The most straightforward option is to split it 50/50, but this will depend on the circumstances.
- Will you need a mortgage and who is responsible for paying it?
- Will any improvements or repairs need to be made on the property? Who will organise and fund this?
- What will happen if someone wants to sell the property in the future?
In some instances, it may be necessary to get a Declaration of Trust. This document is legally binding and aims to clearly establish the answers to these questions.
The declaration of trust can help to avoid disputes and miscommunications, keeping everyone on the same page where ownership of the property is concerned.
In addition to this, updating or creating a Will that explains what will happen to the property in the event of a death is an important way to avoid complications in the future.
Joint tenants are a type of property ownership where each tenant owns the entire property. This means that in the event of a death the property will remain in the hands of the joint tenant and not the deceased’s loved ones.
If you have this type of property ownership, you are not able to include the property in your Will unless the joint tenants in question are married or in a civil partnership. In this instance, you may also have to pay inheritance tax.
Because all joint tenants own the entire property, they are not able to act as if they have a share. For instance, if the tenants need a mortgage, they must all apply for a joint mortgage.
Tenants in common
Unlike joint ownership, tenants in common own a share of the property, allowing you to pass on your share to a loved one in your Will. However, this does mean that in the event of a death, ownership of the property is not automatically transferred to the other tenants in common.
Additionally, a tenant in common can mortgage their share of the property if they can find a lender who is willing to do so.
Can tenants in common take out a joint mortgage?
Whether tenants in common can take out a joint mortgage will depend on the lender; however, many will agree to the joint mortgage and will allow a maximum of four tenants to apply.
It’s important to note that the size of the mortgage will likely be decided based on the tenants with the highest incomes.
Additionally, when it comes to a joint mortgage you will be required to be jointly and severally liable. This is so that if one individual cannot or is withholding payment to the mortgage, it will be the legal responsibility of the other tenants to pay their share.
That’s why it is crucial that you only choose to buy with someone that you know and trust. Ensure that you have discussed all of these matters before you make the purchase, and consider seeking independent legal support, to protect both yourself and the other tenant.
Changing the type of ownership
If things change, it is possible to change the type of ownership. For example, if you brought a property with a partner but now you have separated.
Doing this will not cost you anything, but you will need to fill in the relevant documents and register the change with the HM Land Registry, a conveyancer can help you with this.
It is possible to transfer ownership for all types of property ownership, including tenants in common, joint tenants, and if you are the sole owner. You can transfer ownership to family members, become the sole owner of a property, or even change from a sole owner to a tenant in common or joint tenant.
How to transfer ownership into joint names
Sometimes you may feel that it is necessary to divide property ownership, for instance, if you want to partner to own half of the property.
The easiest way to accomplish this is to gift the property. In this instance, you will not have to pay taxes as there has been no transfer of money. To do this, all you have to do is add your partner’s name to the title deed.
Another option is a transfer of equity. This is when your partner purchases a share of the property. This will require you to hire a solicitor to manage the transfer and pay stamp duty.
Who has rights to the property if the relationship breaks down?
Choosing to buy together is a difficult decision. You don’t know how your relationship with that person will change in the future and how that could affect your living situation.
If you are joint tenants and the relationship breaks down, you both have the right to live in the property. As joint tenants, you also both have the right to apply for a court order for the property to be sold and the proceeding divided.
It may be beneficial to sever the joint tenancy when the relationship breaks down. This will turn the tenancy into tenancy common. Tenancy common divides the property between owners giving each a share of the property.
Contact Stephen Rimmer property conveyancing solicitors
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