The Free Legal Agreement

The Share to Buy Legal Agreement

One of the most common questions people ask when they hear about share to buy is: what if someone wants to move out? The answer is that we have designed share to buy not as just another mortgage but as a package. A key part of this package is the Share to Buy Legal Agreement, which is provided for free and explains what would happen if, amongst other things, one of the owners wants to leave the property. The key points of the agreement are explained below. You should note:

• There is no charge for the legal agreement.
• It is your legal agreement and nothing to do with the lender. As such, it is entirely up to you what goes in to the agreement and you can amend or re-draft as you see fit, but we would recommend that you only do so after consultation with your solicitor.
• We will provide you with a copy of the agreement when you receive your mortgage offer.
• The share to buy legal agreement is available whichever solicitor you use. In addition, we will offer you the option of solicitors who are expert in the share to buy legal agreement and who will carry out both your conveyancing (standard house buying legal work) and assist you with preparing the agreement, all for a single competitive fee. Click here for our FAQ with further information on this arrangement with our partner solicitors.
• If you use your own solicitor, we will still provide the legal agreement to you and you should go through it with them. Of course, they may charge for this but we believe this would be significantly cheaper than if they drafted a comprehensive agreement from scratch.

Key points of the Share to Buy Legal Agreement

The following is a summary of the Share to Buy Legal Agreement. The legal agreement sets out:

1. The share each owner has in the property.
2. The percentage of the mortgage for which each owner is responsible.
3. In the event of one or more owners wishing to sell it specifies that they must first offer their share to the remaining owners, at the current market valuation:
   • If the other owner/s wish to buy, they apply to the lender to take over the share of the departing person and if they are successful, the person selling their share is removed from the mortgage.
   • If the remaining owners do not wish to purchase, either singly or together, or the lender will not increase the lending to enable them to do so, then the share may be offered on the open market (please contact us if you wish to do so).
   • If no purchaser for the share can be found within a period of four months then the seller can require that the whole property is sold, each owner receiving their share of the remaining equity. Click here for a worked example on calculating ownership stakes.
4. In the event that an owner wishes to vacate the property but retain their stake in it, he or she may rent out their room. If the rent is below £4,250 per annum this will be tax free, under the 'Rent a Room' scheme. See the FAQs sections for more details of the 'Rent a Room' scheme.
5. All owners agree to put in place and maintain life and critical illness insurance to the value of their share of the mortgage. Where an owner is unable to obtain cover due to medical reasons, he/she must advise the other co-owners. They may proceed at their discretion. See the FAQ, 'are these insurances compulsory', and other insurance FAQs.
6. All owners undertake to put in place and maintain Accident, Sickness and Unemployment protection cover, sufficient to cover their share of the mortgage payments. See the FAQ, 'are these insurances compulsory', and other insurance FAQs.
7. In the event of the death of one of the owners, his/her estate will be required to meet the cost of the deceased's share of the monthly mortgage payment until redeemed (policy will be payable to the estate/beneficiaries). Their estate must offer their interest in the property, firstly to the other owners at the current market rate and, if they are not willing/able to purchase, then the estate may seek another purchaser - or indeed rent until a purchaser can be found.
8. In the event of a successful claim for critical illness being paid, the policy holder agrees to use the funds received to repay their share of the mortgage.
9. If one of the owners deliberately goes into default by absenting themselves without making arrangements to maintain their share of the mortgage - subject to a time-limit of two months, then the remaining owners can rent the absent party's space (paying his/her share of the mortgage and retaining any profit for the aggravation) or purchase or sell his/her share of the property at the current market rate. Any residual monies, after deduction of reasonable expenses, will be placed, where possible, in the bank account of the absconder.
10. If one of the owners is in breach of the Share to Buy Legal Agreement by failing to make their share of either the mortgage repayments or insurance premiums, then the other owner/s either singly or together can require that person to remedy the situation and should they fail to comply within a period of two months from the onset of the default, force the sale of the share of the defaulting owner as if they had absented themselves.
11. The owners will open a joint bank account or designate an account for the purpose of the payment of mortgage repayments and any insurance premiums. Each owner is responsible for making a timely payment into the account to cover his/her share of the above payments. Please note that it is not compulsory to open a joint account and a designated account of one of the applicants may be used until one is open.