PCS Legal: Buying a property together – what should be considered?

Understanding the legalities and safeguarding your interests in property transactions

Buying a property is one of the biggest financial transactions of your life and unfortunately, in recent times the process has not become easier. Given the recent mortgage interest rate changes, more buyers are now looking at alternative routes to make steps onto the property ladder.

The most common increase is buyers now purchasing with existing friends and family. Buying with another person provides a greater chance of obtaining a mortgage. It opens the doors to a wider range of available properties that may have otherwise been unachievable when purchasing alone.

With this rise in mind, what is there to consider when buying a property with a friend or family member? Are there additional parts of the process to consider?

How to own the property?

When property is owned by two or more people, for their own benefit, it is expressed to be owned by them either as joint tenants or tenants in common. These are legal terms which may best be described as follows:

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Joint tenants

For practical purposes, this applies if it is intended that you will each hold one equal share in the property. Under a joint tenancy upon the death of one of the co-owners, the deceased’s share will automatically and immediately pass to the surviving co-owner, irrespective of any direction in their Will or under the terms of the deceased’s intestacy. If you wish your co-owner to receive the whole of the property upon your death then a joint tenancy should be utilised.

Tenants in Common

Upon the death of one of the co-owners, the deceased’s shares do not pass to the other surviving co-owner but remain part of the deceased’s Estate and can pass as directed under any Will made by the deceased person or to his or her next of kin as appropriate under an intestacy. Also, under a tenancy in common, the property can be held by you in unequal shares. It may therefore reflect the percentages to which you will each be entitled from any future sale of the property.

This form of tenancy is especially appropriate where co-purchasers are contributing unequally to the purchase price of the property. If a tenancy in common is to be used the owners must consider making a Will. Please also note that if co-owners subsequently marry then their shares in the property may subsequently be varied by a divorce court in any event.

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Additional legal documents to consider

If you decide it’s best to purchase as Tenants in Common please consider whether you require a Declaration of Trust, also known as a Trust Deed. The Declaration or Trust Deed can stipulate either a percentage or an exact amount each person has put into the transaction. For example, the Deed could state that 70% was paid by one party. The declaration will go on to state that if the property is sold or transferred to an alternate owner the percentage or specific amount should be repaid therefore protecting your investment. The document itself can be backed up by a restriction placed on the title which will state the existence of the document.

Another document to consider once you have purchased your property would be to create a Will. By making a Will you ensure your share of the property goes to the right people in the right proportions thereby avoiding family disputes and expenses.

If you jointly own a property with another person then under survivorship laws, if you own your house as Joint Tenants, the other owner will immediately become the new owner upon your death. However, if you are Tenants in Common with another person, the intestacy rules will apply unless you have a Will in place stating otherwise.

For further information on purchasing a property please do not hesitate to contact PCS Legal who specialises in all areas of property law on your behalf.

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