Buying a property with another person can be an attractive option, as it means you can pool your savings towards a deposit, get a larger mortgage, and share the burden of monthly repayments and any service charges.
Although it’s most common for people to buy with one other person, it’s possible for up to four people to be legal co-owners of a property – even if they’re not related. So, if you have friends or family members who you trust enough to make a major investment with, buying a property under joint ownership might be a good option.
Topics to be answered in this article
Setting up co-ownership
You have a few options on how you register your interests in the property at the Land Registry. In short, under joint tenancy, all parties jointly own 100% of the beneficial title, while tenants in common each own a specified share. It is worth going into further detail on both options to work out which one is right for you.
What is Joint Tenancy?
Under a joint tenancy, all parties own the whole of the property, rather than a quantified share. In the eyes of the law, you must all act together as a single owner. If you want to sell the property, you must all agree.
As a joint tenant, you cannot leave your interest in the property to someone else in your will. If one of you dies, your interest will automatically pass to the surviving owner(s). This is known as the ‘right of survivorship’. This form of joint ownership tends to be most popular with married couples, who do not have children from prior relationships that they may wish to provide for in the event of their death.
What is Tenancy in Common?
As tenants in common, you each own a separate share of the property. These shares don’t have to be equal – for example, you might own 65% of the property while your partner has a 35% share.This form of joint ownership tends to be most popular with friends or relatives who are buying together.
As with joint tenancy, you must all agree to sell the property. However, tenants in common can each leave their individual shares in the property to whoever they like in their will. A declaration of trust, setting out your individual shares, would be recommended in this scenario.
Creating a Declaration of Trust
A Declaration of Trust (or otherwise known as a Deed of Trust) is a legally binding document entered into by individuals who are purchasing a property together to record how the property is to be owned. The document can set out the financial contributions made by each party, as well as any future financial arrangements. Importantly, a Declaration of Trust can include third parties who have an interest in the property but are not the registered proprietors.
The need for a Declaration of Trust between co-owners arises when the property has been purchased between parties as Tenants in Common. There is a presumption when purchasing a property as Tenants in Common that the proprietors will own the property in equal shares. If this is not the intention of the purchasers then a Declaration of Trust should be drawn up to set out the alternative intentions.
If the actual intentions of the proprietors are not included within a Declaration of Trust then there is potential for a dispute when the property is to be sold. In the event a dispute does arise, a Declaration of Trust is considered evidence of each party’s beneficial interest in the property. It can therefore prevent potential stress, cost and uncertainty of legal proceedings.
How can Goughs help?
Both types of beneficial joint ownership have pros and cons, depending on your personal circumstances and your relationship with your fellow buyer(s). Whichever option you choose, it is important to have this conversation upfront. It is a decision to make at the outset,while also remembering to keep it under review.
At Goughs, we will work closely with you to understand the specifics regarding your joint ownership agreement and help you get to grips with what’s needed. We have all of the expertise needed to assist you with the preparation of Joint Tenancy, Tenancy in Common, and can assist with creating a declaration of trust if it’s required. Get in touch today.
