Joint Property Ownership - What's Right For You?
With many people clubbing together with family, friends or cohabiting partners in order to get a foot on the property ladder, co-ownership is on the increase in the UK. At a time when the younger generation in particular are finding it hard to afford a home of their own, joint property ownership can be a sensible option.
While it’s a practical solution for many, there are a few pitfalls to avoid if you don’t want to encounter serious problems further down the line. Entering into a joint ownership arrangement requires careful thought as well as professional advice from a property law expert.
Two Types of Property Co-ownership
There are two ways that you can jointly purchase a property. You can either become joint tenants or tenants in common. Which one you choose depends upon your personal circumstances and the possible issues you might need to consider in the future, such as a relationship breakdown or the death of one party.
In a joint tenancy, the parties own the whole of the property together - each having an equal share and equal rights over the property. Many married couples and those in civil partnerships tend to choose this form of joint ownership. The issues to consider here are:
- If you sell the property, you will each get a 50% share irrespective of how much you contributed to mortgage payments or the initial purchase of the property. So, if you paid the lion’s share, in the event of a relationship breakdown, you may not get out what you put in.
- If one of you wants to sell but the other doesn’t, you’ll have to apply to the courts to force the other party to sell, which can be difficult.
- If one of you dies, your share of the home will automatically transfer to the surviving party who then becomes the sole owner. You won’t be able to leave your share to anyone else in a will, for example. This can be an issue for people who have children from a previous marriage, as it could mean they miss out on their inheritance.
Tenants in Common
Tenants in common each own a specified share of the property which can either be equal or proportional to their individual contributions. Co-habiting couples and people with children from a previous relationship often choose this form of co-ownership. If you decide on this option, it’s sensible to have a Declaration of Trust drawn up. This is a document that sets out each person’s contributions and share in the property as well what the parties agree should happen when one party passes away or wants to sell. Issue to consider are:
- Each party’s interest in the property is separate and is theirs to sell or give away according to their wishes. There’s a presumption of an equal split unless the Trust Deed expresses otherwise.
- If one party dies, their share does not automatically pass to the surviving co-owner. It will pass to whoever they have nominated in their will or, if they die intestate, be dealt with according to the Rules of Intestacy. This could leave the surviving co-owner in an awkward position should the new beneficiary decide to sell, for example.
Having a Declaration of Trust drawn up by a solicitor is advisable for tenants in common in order to avoid expensive legal battles and protect their individual interests in the event of death or a relationship breakdown.
Getting Professional Legal Advice
None of us know what will happen in the future but it pays to take all eventualities into account when deciding on one of the most important purchases we’ll ever make. Weighing up the pros and cons of joint tenancy or tenancy in common can help you decide on a form of co-ownership that suits your personal circumstances. Although it’s possible to change from joint tenants to tenants in common and vice versa after the fact, it’s always easier to get things right the first time. Speaking to a property law expert about your joint property purchase could help you safeguard your investment, avoid costly legal bills and save you from unnecessary heartache in the future.