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We`re Moving In Together what legal issues do we need to think about?
Buying a House Together - Joint Tenants or Tenants in Common
When you move buy a property with your partner it is essential to consider how the property will be legally owned by you both. There are two options, joint tenants or tenants in common.
Joint Tenants
Buying a property as joint tenants means that when you come to sell, the law assumes that you are each entitled to a 50% share in the net equity in the property; the net equity being the current market value of the house, less the amount required to redeem the mortgage and any notional or actual costs of sale.
This is therefore appropriate where both parties will be contributing equally towards the purchase of, and outgoings on, the property. It may still be appropriate if it is agreed at the outset that joint tenancy is acceptable to both partners, even if it is expected that one`s financial contribution will outweigh the other`s; for example where the property is purchased with the intention of it being a joint venture and where there is an understanding that the person contributing less financially will contribute in other ways, such as by raising children or keeping house etc.
With a joint tenancy if your partner dies before you, then your partner`s share (ie the whole house) will automatically pass to you.
Tenants in Common
A couple may wish to buy their house as joint owners but as `tenants in common` where, for example, one party contributed the deposit on the purchase of the property or contributed funds from the sale of a previously owned property and it is intended that that party regain that share when the jointly owned property is sold. Similarly, if it is known at the time of purchase that one party is going to be paying more of the outgoings on the property than the other.
So, for example, if Jack and Jess buy a house costing 100,000 and Jess pays a deposit of 10,000 from the sale of a previous property, then she will be contributing 10% of the purchase price of the new home. So, Jess may want a document known as a `Declaration of Trust` drawn up to record this and prove that upon any future sale, she should receive the first 10% of the net proceeds (or 10,000, whichever is the greater) before the balance is divided equally between she and Jack.
If no such declaration exists, then it is presumed that tenants in common hold a 50% share each.
With a tenancy in common, your share, and that of your partner will, upon death, be left to your respective estates to be passed on by will, or the rules of intestacy in the absence of any will.
Therefore, it is important to have an up to date will if you own property as a tenant in common. If you want to make a will then Womenlegal`s Louise can help you.
Cohabitation Agreements
At the moment there is still no legislation to protect the rights of cohabitees in the way that there is for married couples, though it`s a common misconception that people obtain these same rights after a few years of cohabitation, becoming `common law` spouses.
That`s just not true, so it`s a good idea to take the precaution of being explicit about the terms under which you enter into a new cohabiting relationship.
To do this, couples can draw up a written `Living Together Agreement`, also known as a `Cohabitation Contract`, to record their intentions in terms of property ownership, other financial responsibilities, and what will happen in the unfortunate event of separation. They might also be useful evidence of a common intention to share property. The use of these agreements can thus help avoid the potential for expensive and acrimonious litigation.
Whilst drawing up a Living Together Agreement is a prudent course of action to take before embarking on a new cohabiting relationship, it is also important to be aware that these agreements are not legally enforceable at the moment, as the Courts won`t let people sign away their individual rights. It is essential, therefore, to obtain advice on every clause. The Courts will take the agreement into account, however, and, if both parties have had the benefit of sound legal advice, it is much more likely that it will be upheld.
The whole point of these agreements though is that they are designed to help avoid that dispute in the first place.
Sadly, despite these agreements being available, I still help a lot of clients who are separating after living with a partner for years and, whilst property is in one name, the other partner has helped pay the mortgage. The lines become blurred as to who is entitled to what and it can take time to unravel matters. This could have been avoided if an agreement had been made earlier.
As these agreements are legal documents, however, both parties should seek the advice of a solicitor independently. It must also be clear that both individuals intend the agreement to be binding on them. The fact that both have received legal advice will help show this.
The agreement should only deal with financial and property matters however. Any reference to other living arrangements or any terms which appear vague or uncertain may make the agreement unenforceable.
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