Owning property together – it pays to prepare
Rishi Sunak’s recent extension of the stamp duty concession and announcement of a ‘mortgage guarantee’ to assist those struggling to save a deposit of more than 5 per cent is helping to turn ‘generation rent’ into ‘generation buy’.
For those buying together, some of those potential savings would wisely be invested in proper advice.
Many first-time buyers will not be married and some may be reliant on financial assistance from relatives. Buying a property together is a huge commitment and care needs to be taken to minimise problems that might arise in the event of separation.
What if there are big differences between initial contributions? What if the owners are not contributing equally towards the mortgage repayments? Are the couple happy for any equity in the property to be owned equally regardless or would they prefer that they own in unequal shares to reflect contributions?
It is always better to discuss, hopefully agree, and then properly document any such agreement. Additional legal costs in having a formal deed prepared at the time of purchase will be significantly less than those incurred over a fight over the parties’ shares at a later date.
If matters ever came to court, in the absence of clear evidence of what was agreed by the owners the court must investigate what was said and done to try to infer what the shares were. It can often descend into a case of ‘he said, she said’.
A declaration of trust or co-ownership agreement can clearly set out the shares and stipulate such things as who will pay the mortgage. It may also contain provision to allow one person to buy out the other’s share on separation.
Loans from, or financial assistance given by, family members can also be a bone of contention on separation. Having clear evidence of whether such assistance is a loan or gift can be enormously helpful should things not work out as planned.
In an appropriate case it may also be sensible to have a more wide-ranging cohabitation agreement which can provide in greater detail how outgoings are to be paid and for example, more expensive possessions.
Owen Byrne is a legal director in the Cambridge office of BDB Pitmans advising on such agreements. Contact firstname.lastname@example.org or visit bdbpitmans.com.
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