Things to consider when buying a property as an unmarried couple

When buying a property together as an unmarried couple there are several important issues to consider. Making these decisions and putting the right legal provisions in place before the purchase can help prevent the possibility of disagreements during your relationship or if the relationship ends.

Joint Tenants or Tenants in Common?

When two or more people buy a property there are 2 ways the property can be legally held; either tenants in common or joint tenants.

Joint Tenants

If you are joint tenants, on the first death (either yourself or the other joint owner), the whole of the property automatically passes to the survivor, regardless of what is stated in the Will of the deceased owner and regardless of the Rules of Intestacy, which apply where no Will is left.

If you proceed to purchase a property as joint tenants you will, in effect, own the property in equal shares and each of you is entitled to one half of the net proceeds of sale.

Any owner of a property and party to a joint tenancy can sever or break the joint tenancy at any time by serving written notice on the other owner(s). If the joint tenancy is severed then the owners of the property become tenants in common (see below).

Tenants in Common

If you are tenants in common, the survivor of you would not automatically inherit the whole property when the other owner dies. Each owner can leave his or her share to whomever they wishes in their Will. If there is no Will the Intestacy Rules would decide what happens to the deceased person’s share. The Intestacy Rules provide that the estate would usually pass to the nearest surviving relatives of the deceased.

If you own as tenants in common you can also determine the sizes of your respective shares. For example, you might each want to own a half share or you might prefer that your shares reflect your respective contributions to the purchase price.

You should also note that if you own the property as tenants in common that you should seriously consider making wills to prevent the operation of the Intestacy Rules. It might well be that your co-owner would not inherit under the Intestacy Rules and you might wish to ensure that he or she would own the whole property after your death.

There may be a number of other reasons why it will be appropriate for you to own a property jointly as tenants in common with separate identifiable shares or percentages, for example:-

1. There may be future Inheritance or Capital Gains Tax implications if you own the property jointly as joint tenants so that upon the death of one or other of you the survivor would then own the whole of the property.
2. There may be long term care implications where the entire property may have to be sold in order to pay for long term care.
3. It may be that the two parties have brought different amounts of money into the marriage/partnership and wish for this to be reflected in the way that the property is owned.
4. It may be that the different spouses or partners want to ensure that they can provide for different members of their respective families by leaving them a share in the property, rather than by leaving it to the other joint owner.
5. Sometimes funds are provided by other third parties i.e. a joint owner’s parent and this may need to be reflected in the way in which the property is owned.
6. In certain circumstances if you co-habit or become engaged to another person, that person may be able to pursue a claim against any property that you own. If you marry then your spouse will be able to pursue a claim against all of your assets including pensions and so it may be an advantage to enter into a prenuptial or cohabitation agreement or Declaration of Trust recording your intentions as to how a joint asset should be owned. If there is no agreement in place a court would infer that you were joint and equal owners of the property if there is no evidence to the contrary despite the unequal contributions to the purchase price. 
7. These considerations can apply equally to the purchase of property in joint names or to the subsequent transfer of a property owned by one person into joint names.

How will the mortgage and bills be paid?

It is a good idea to agree in advance exactly what percentage of bills will be paid by each person. If there is a difference it is for you to decide if it needs to be reflected in how much each of your shares are in the property.

If you have a mortgage you will both be individually responsible for payment of the mortgage. This is the case whether the property is held as tenants in common or joint tenants. There are cases where one person provides the capital while the other takes on the responsibility of paying the mortgage but this does not alter the fact that legally they are both jointly and individually responsible for payment of the mortgage and therefore if one party does not pay, responsibility to make the mortgage repayment will fall to the other party.

What will happen to the property if the relationship breaks down?

It isn’t something most people want to think about but it is worth having plan in place for what happens to the property if you were to separate. This could be an agreement to say the property must be sold or that if one of you was willing and able to buy the other persons share in the property. It could also include how the property will be valued. For example, the valuation could be carried out by using a number of estate agents for valuations and using the average of these to agree the sale price of the property.

Should we create a cohabitation agreement?

Anything you and your partner have agreed prior to the purchase should ideally be put in a legally binding document, known as a cohabitation agreement.

A cohabitation agreement will give you both certainty over how you will handle issues relating to your home during your relationship but also if the relationship was to end. This can save time, money and a lot of stress no matter what happens.

How can we help?

Our experienced property team can deal with the purchasing of the property and give you guidance on buying the property as tenants in common or joint tenants. Should you decide to make a cohabitation agreement then our family team will be happy to assist you.