Whether you’re married or in a long-term relationship, owning a home together is a huge milestone for couples. Joint ownership of property provides stability, a shared financial investment, and the foundation for a future together.
However, it also comes with important responsibilities that require careful thought and planning.
In this blog post, we’ll explore different types of joint ownership, the financial commitments and legal considerations to keep in mind, what happens if a relationship breaks down and how we can support you through the buying process.
Types of joint ownership
When purchasing a property together, it is critical to understand the difference between the two types of ownership: joint tenancy and tenancy in common.
Joint tenancy
In a joint tenancy, two or more people have equal ownership and rights to a property rather than holding separate shares.
In this agreement, if one of the owners passes away, their share is automatically transferred to the surviving owner (this is known as the right of survivorship). This means that the property is not part of the deceased partner’s estate and cannot be transferred in a will.
Joint tenancy is often preferred by married couples or those seeking straightforward, equal ownership.
However, this agreement does have drawbacks. For example, if one partner contributes more money to the property, whether that be a deposit or home improvements, they will still have an equal share.
As well as this, selling or refinancing the property requires the consent of all joint tenants, which can complicate matters in cases of relationship breakdown or financial disputes.
Tenants in common
With tenants in common, each partner owns a proportionate share of the property, which does not have to be equal.
For example, one partner may own 70% while the other owns 30%. Unlike joint tenancy, there is no automatic right of survivorship; each person’s share is considered part of their estate and may be left to a beneficiary in their will.
This arrangement is particularly useful if one person contributed more to the deposit or mortgage, or if you want to ensure that your share of the property is distributed to children from a previous relationship. It also allows co-owners to structure ownership in accordance with their financial or estate planning objectives.
However, tenants in common can be more complex to manage. A deed of trust is often used to formally establish each owner’s share and responsibilities, such as who pays mortgage payments, maintenance costs, and how proceeds will be divided if the property is sold.
Also, disputes may arise if one person wishes to sell their share or the entire property while the other does not, potentially leading to legal complications.
Financial responsibilities
Joint ownership of property comes with financial obligations. Before buying a home with your partner, you should consider:
Mortgage payments
Mortgages are the most significant financial commitments in joint property ownership.
Both owners are typically responsible for making mortgage payments; however, if one fails to contribute, the other may still be held liable for the entire amount.
It is critical to have a clear understanding of how the payments will be split and what will happen if one partner experiences financial difficulties. Regular communication about finances can help prevent issues down the line.
Deposits and contributions
It’s important to come to a fair agreement on the deposit amount each partner will contribute, as well as how ongoing costs, such as maintenance, repairs, and home improvements, will be shared.
Setting expectations for these contributions early on can help to avoid future misunderstandings.
If one partner contributes more than the other, it’s wise to have this clearly documented through a Declaration of Trust, which we’ll discuss later in the blog post.
Household bills and expenses
There are various household bills that need to be considered. These include utility bills, council tax, home insurance, and other regular expenses.
A good way to manage these costs is to open a joint account in which both partners can contribute an agreed-upon amount each month. This simplifies payments and ensures that nothing is overlooked.
Legal considerations
Joint ownership of property involves legal considerations that protect both parties’ rights and provide a framework for dealing with unforeseen circumstances.
Declaration of Trust
A Declaration of Trust is a vital legal document in joint property ownership.
It outlines the financial contributions of each partner and specifies what happens if the relationship changes or if one partner wants to sell the property.
This document can help prevent future disputes by providing a clear framework for how the property and any proceeds from its sale will be divided.
Even if one partner contributes more to the purchase price, a Declaration of Trust ensures that both parties’ rights are protected.
Cohabitation agreements
Unmarried couples should consider a cohabitation agreement.
This legally binding document establishes property rights and clarifies financial responsibilities and the distribution of assets in the event of separation, a change in circumstances, or other significant events.
What happens if the relationship breaks down?
If a couple own a property and their relationship breaks down, they have several options. These include:
Sell the property
If both parties agree to sell the property, the legal process involves obtaining a professional valuation to determine its market value, finding a buyer, and managing the negotiations.
Once an offer is accepted, the sale proceeds through conveyancing, where legal checks are performed, contracts are exchanged, and the sale is completed.
Any outstanding mortgage, legal fees, and associated costs are settled from the proceeds before the remaining balance is divided according to the agreed-upon ownership split, whether outlined in a legal agreement or determined by mutual consent.
One partner can buy out the other
One party may decide to buy out the other’s share of the property, allowing them to take complete ownership.
If there is an existing mortgage, the party buying out the other must refinance or obtain a new mortgage in their own name, ensuring they meet the lender’s affordability requirements.
The legal steps include creating a transfer deed and settling any outstanding financial obligations. It’s also important to consider potential costs like legal fees, mortgage arrangement fees, and any applicable stamp duty, which may be required depending on the value of the transaction.
Keep the property as co-owners
Some ex-partners may choose to keep joint ownership of the property, especially if children are involved and continuity in living arrangements is important, or if market conditions make selling financially unfeasible.
This arrangement can provide stability while also allowing both parties to benefit from any future property appreciation.
However, this will mean ongoing financial obligations, mortgage payments, and potential disagreements over property maintenance or future sale decisions.
Clear agreements should be established regarding financial contributions, decision-making responsibilities, and long-term property plans to avoid future conflicts.
Disagreements: what legal steps can be taken?
If one party wants to sell and the other does not, and you are unable to reach an agreement, mediation or legal intervention may be required to resolve the dispute.
Mediation can assist both parties in reaching a compromise, whether through a buyout agreement or another solution.
If no solution is reached, the case may be taken to court, where a judge can order a sale, especially if one party demonstrates that keeping the property is no longer viable. However, this legal route can be expensive and time-consuming.
How Peter Ross can help
Seeking legal advice before purchasing a property together is critical.
At Peter Ross, our specialist property solicitors can help you understand the legal and financial implications, allowing you to make informed decisions specific to your situation.
We can advise on the best ownership structure for your situation and protect your interests through co-ownership agreements that specify what happens if circumstances change.
Our team is here to handle the legal paperwork and make the process easier and less stressful for you and your partner.
Contact us today to find out how we can help you navigate joint property ownership with confidence.