Deciding how to share ownership of your home should be a carefully thought out decision, especially as it can help protect your financial security in the future.
With different ownership options available to cater for couples, friends and family members who buy a home together, purchasing a property in joint names can be confusing.
Here is a summary of the different joint ownership options available to help you make the right decision when purchasing a property with someone else.
When purchasing a property together, owners can choose to hold their stake in the home as either joint tenants or tenants in common.
Joint tenants are treated as co-owners and both have equal rights to the whole of the property, but as joint tenants don’t have a quantified share in the home, they are not able to leave a share of the property in their will.
If you are joint tenants and you decide to sell the property, or if you separate with your partner, it will be presumed that you both own the property equally, regardless of each person’s contributions to the purchase price or mortgage repayments.
According to the right of survivorship, on the death of one co-owner, their interest in the property would automatically pass on to the remaining co-owner, meaning the surviving person would own all of the property and it would form part of their estate on their death.
Married couples or those in a civil partnership commonly use this method of co-ownership because the right of survivorship makes it straightforward to inherit each other’s shares in the property.
There may however be reasons not to become joint tenants, for example if one owner has made a larger contribution to the purchase price of the property and wants this to be recognised if the property is sold or if they separate. A joint tenancy may also not be suitable if you have a family from an earlier marriage and wish to leave your interest in the property to them instead of passing it to the other co-owner when you die.
Tenants in common
If you hold a property as tenants in common, each of you will own a specified share in the property and your share will be treated as separate to the other owners.
When deciding to purchase a property as tenants in common, you will need to consider whether each person’s share will be fixed from the outset or whether the shares will vary according to the financial contributions made by each person during the ownership of the property.
In coming to your decision, you should think about whether you wish to divide the ownership of the property by fixed or unequal shares.
If you opt for fixed shares, your shares may be equal, but they do not have to be. Holding the property as tenants in common in fixed unequal shares may be desirable if you have made unequal contributions to the purchase price of the property.
If your shares are fixed, you will need to decide the size of those shares now, but you may also need to revisit the split in the future if there is a change of circumstances which you want to reflect in the ownership proportions. An example would be if only one of the co-owners pays the costs of significant improvements to the property.
If financial contributions towards the property may be unequal, for example if one person pays a larger proportion of the mortgage repayments or the costs of any major works to the property, you may want your shares to reflect this.
Unequal share ownership means that your share in the property may fluctuate depending on who pays what, so the calculations will be more complex and you will need to keep accurate records of each person’s contributions.
One of the main benefits of holding a property as tenants in common is that your share of the property can be passed on to another person, either during your lifetime or under your will, however if you don’t have a will at the time of your death then your share will pass in accordance with the rules of intestacy.
If you are deciding to purchase a home with someone else it is vital that you seek expert legal advice to ensure the joint ownership option you choose is the right one for you.
For more information on joint property ownership contact residential property expert Donna Fildes on 01995 607950. Donna is part of the team at Harrison Drury solicitors in Preston – HD also have offices and lawyers in Lancaster, Kendal, Garstang and most recently Clitheroe.