In this article, we look at how you can buy a property with a partner. By that we mean someone you are or intending to cohabit with but are not married to or in a civil partnership with. It is perfectly normal for cohabiting couples to buy a property in their joint names.
We are also seeing more instances where two people who are not in a relationship buying a property in their joint names. The main driver of this is affordability. Mortgage lenders have long since realised that two people do not need to be in a relationship to be joint homeowners and joint holders of the mortgage.
We are also seeing many instances of two people who currently own a house in their own name deciding to set up home together. On many occasions, each of them will sell their house in order to contribute to the deposit on the new house they will jointly own.
What should two people think about when buying a house in joint names?
Whether the couple are in a relationship or not, there are certain pragmatic steps you might wish to consider before you go ahead with the purchase. The first, perhaps obvious, thing is that couples who are married or in a civil partnership have rights that are enshrined in law should, for instance, they separate or should one of them die. Not so with cohabiting couples or two people who have purchased a property together.
When two people buy a property, if they apply jointly for a mortgage, the title to the property will need to be in joint names. Given that the title will be in joint names, the first question they must consider is whether to include a survivorship destination in the title. What that means is if one of them should die, their share in the property automatically transfers to the surviving person.
Whilst that might be perfectly acceptable for a couple who are in a relationship, it is unlikely to be suitable for two people who have bought a house jointly for economic reasons.
The alternative to having a survivorship destination in the title is to own the house jointly with each share in the house going to the relations of the deceased partner on death. This can be either through a Will or through the law of succession. This, in itself, can cause issues because it might mean that the surviving partner then owns a joint share in the house with, potentially, strangers who just want to sell it and realise the value from it.
Does joint ownership mean equal shares?
We frequently discuss purchase options with two people who are buying together for the first time, especially when they have other property they have sold and the contribution to the deposit for the new house is unequal. Whilst the title will normally run in their joint names, it is never entirely clear in the Title that there has been an unequal contribution towards the deposit.
Couples who find themselves in this position should consider recording the amount or percentage of the deposit each contributes. They should also consider how the proceeds of sale of the new property should be split when the property is sold.
What about the running costs of the property?
This can sometimes get lost in the excitement of the purchase. It is always a good idea to have a separate joint account into which each party contributes an amount each month. That amount should cover not only the mortgage payments but also things like council tax, factors bills, fuel costs and the like. This makes is clear that the parties are jointly contributing to the running costs of the property.
Why is this important?
These are all important things to think about because it is not normally purchasing the property that is the problem. Problems tend to arise should the parties separate or if one of them should die. As with most things, it is easier to get into the relationship, even if it is platonic, than getting out!
You need not only to consider the practicalities of separation if you are in a romantic relationship with your co-owner, but a situation where your partner, whether you are in a romantic relationship or not, wishes to sell the property.
For all of these reasons, when two people who are not married or in a civil partnership decide to buy a house, it is best to enter into a Cohabitation Agreement. This will set out who contributed what in respect of the deposit and what happens to the shares of the free proceeds of any future sale. It can also set out what should happen in the event of a separation, if one party should die or if one party wishes to sell and move on.
By having a cohabitation agreement, you will have a clear path to follow should they reach the stage where they wish to end the arrangement.
If you would like to discuss having a cohabitation agreement prepared when you are purchasing a property, please discuss this with us.