When you’re caught up in the excitement of buying a home together, it’s easy to overlook the legal protection you might need. It can feel even harder to think about the possibility that the relationship could one day come to an end. But that’s exactly why taking a moment now is so important. A little planning in the short term can save you significant legal and financial difficulty in the future.
The Options
When buying a property together, unmarried couples have a choice over whether to register with the land registry as joint tenants or as tenants in common. In short, under joint tenancy, both partners jointly own the whole property, while with tenants-in-common each own a specified share. It’s worth looking at each of these options in more detail before deciding which one is right for you.
Joint Tenants
Under a joint tenancy, both parties own the whole of the property, not a quantified share. This tends to be the option that most couples choose when they buy together as perhaps it is the more instinctive choice for a couple in the first flush of their relationship when what’s mine is yours and vice versa, and domestic discord seems like a distant prospect.
If they are lucky enough to enjoy a long and lasting relationship which only comes to an end when one of them dies, then in terms of the ownership of the house, the right of survivorship applies. This means that the surviving person from the relationship inherits all of the property on their partner’s death. For the person who dies, it means that they are unable to leave their property, or a share of it, to anyone else other than their partner. However, when the surviving partner then dies, they are free to leave their property to whoever they choose.
In the excitement of buying a place together, it can often be easy to forget the legal protection you might need.
Joint tenancy is generally the simpler of the two options as it doesn’t require working out exactly how much each partner contributes to the purchase price and simply splits it equally between them. If the relationship ends before one of them dies, and they decide to split up, a couple who are joint tenants have options. They might choose to both move out of the property and sell up. In this case, the proceeds are divided 50-50 between them. Or one of them may choose to remain in the property and buy out the 50% share of the other and continue to live there. In instances where both partners want to retain the property and they can’t find a resolution between them, it could become a matter for the courts.
Joint tenancy may be simpler, but it can prove to be insufficient in some instances. In the case of a separation, one of the partners might dispute the straight 50-50 ownership. They may feel they contributed more to the property than their cohabitee and contest this in court, which may have to decide on a new percentage split of ownership. This could also ultimately result in the court ordering the sale of the property.
Tenants in Common
Tenancy in common can help couples bring more clarity to the situation. For example, one party might have made a larger contribution to the purchase price and want this to be recognised. In registering as tenants-in-common the couple will, with a solicitor’s help, agree on what proportion of the property each of them owns. This can be fixed from the outset (for example, there might be a 25%-75% split of the purchase price) but it can also be altered over time to reflect the contributions they make over the ownership of the property. For example, one of the partners may get a new job and start earning more and as a result they increase their share of the ownership through increased contributions from, say, a 25%-75% split to 40%-60%, or any other combination. The appeal of tenancy in common is that it is able to reflect this. Then, if the property is sold or the couple go their separate ways, they know what percentage of the property is theirs.
Under joint tenancy, both partners jointly own the whole property, while with tenants-in-common each own a specified share.
If couples want to go into more detail beyond the percentages of what they own in the property, they can do this using a trust deed or they can set this out in their will. Buying a property as tenants in common also allows them to leave their share of the property to beneficiaries other than their partner when they die. For example, this is a common wish for couples who are in a second marriage where they are unlikely to have more children but would like to leave their share of the property to their respective children from their previous relationships. The benefit of being tenants in common is that it brings greater clarity to the balance of a couple’s ownership of a property and it can allow them more flexibility in who they leave their share to after they have gone, regardless of whether their partner outlives them.
The Broader Canvas
Whichever option couples choose, it’s important that it is a conversation they have upfront. It’s a decision to make at the outset while also remembering to keep it under review. They might hold the property in joint tenancy to begin with and then decide to turn into a tenancy in common at a later time to reflect a change in their lives or circumstances (or vice versa, from tenants-in-common to joint tenants, although this can be more complicated). It’s about making sure everything has been accounted for and there is a safety net for each of them as individuals should the relationship not last over the longer term.
Along with our unique, in-house multi-service offering which can meet your wealth advice and professional and personal legal needs, at Progeny it’s our mission to look at the bigger picture. When buying a property, it’s easy to find an off-the-peg conveyancing service which delivers all you ask for. However, we pride ourselves on stepping back, taking in the broader canvas, and providing you with the all-round advice and protection you need before entering into a property purchase with a partner – one of the biggest commitments of your life.
If you’re considering buying a property with your partner and would like guidance on the best legal structure for you — along with expert mortgage advice — please get in touch.
Please note
The information contained within this document is subject to the UK regulatory regime and is therefore primarily targeted at consumers based in the UK.
This article is distributed for educational purposes only. This communication does not constitute financial advice. Individuals must not rely on this information to make a financial or investment decision. Before making any decision, we recommend you consult your financial planner to take into account your particular investment objectives, financial situation and individual needs.
The opinions stated in this article are those of the author and do not necessarily represent the view of Progeny and should not be relied upon to make a financial decision.
Information contained herein has been obtained from sources believed to be reliable but is not guaranteed.
