Yes - If you are purchasing a property with another party or parties you need to be aware of the options that are open to you in terms of:

• how property can be held by “co-owners” i.e. more than one owner;
• how responsibility for payment of outgoings such as rates, utilities and mortgage payments can be arranged between the co-owners;
• making provision for the possibility of negative equity;
  
• providing for the situation that one or more of the co-owners may want to sell their share;
• how the proceeds of sale should be split between co-owners on completion of the sale of the property once the costs of the sale (e.g. estate agents and legal fees) have been paid.

How is buying property with a co-owner different from buying it on my own?

When buying a property in the names of more than one person there is a choice of how the property is owned:

• Joint tenancy. Each co-owner owns an undivided share in the whole property. Your “share” in the property will pass automatically on your death to your co-owner by what is called “the right of survivorship.” On the death of one co-owner the surviving co-owner(s) will own the whole of the property. You cannot leave ‘your share’ by your will to anyone or in the event that you do not leave a will on your death your share will not be governed by the laws relating to intestacy.
  
  
• Tenancy in common. This means that each co-owner has a beneficial interest in the property. This could be an equal or unequal share depending on numerous factors, for example:
  
  
  • how much each co-owner has contributed to the deposit and purchase price;
  • what share of the outgoings, such as mortgage payments and payment of utilities, each of the co-owners is responsible for;
  • what contributions each of the co-owners makes to the cost of e.g. repairs, alterations and extensions, house keeping etc

If you decide to buy a property with another person as a tenant in common, each co-owner’s share of the property will pass according to the terms of his/her will or according to the rules which apply on an intestacy if no will is left on death.

When deciding whether you want to buy the property as joint tenants or tenants in common you also need to think about any children you may have from a previous relationship. Remember that if you decide to buy as joint tenants you will not be able to leave any children you have your share in the property.

Once we have decided to buy as joint tenants or tenants in common do we need to tell our solicitor?

Yes - make sure that you give your solicitor clear instructions at an early stage of the purchase as to whether you wish the property to be held by you with your co-owner or owners as joint tenants or tenants in common and if as tenants in common then whether in equal or unequal shares.

If I decide to buy a property with a co-owner can my solicitor act for my co-owner as well as for me?

Whilst your solicitor is acting for both or all of the co-owners, in connection with the purchase of the property there may be a situation where your interests conflict with that of your co-owner when he/she is advising you about your relationship with your co-owner. If a conflict arises, your solicitor will discuss with you whether or not it is appropriate for him/her to continue to advise you and/or your co-owner in relation to the co-ownership arrangements. In any event, we would advise each co-owner strongly to consider obtaining separate independent legal advice in connection with the co-ownership arrangements.

What do you mean by “co-ownership arrangements”?

Especially where co-owners are contributing in unequal amounts to the deposit or the purchase price of the property, or following completion to mortgage payments and other outgoings, you need to consider whether the arrangements between the co-owners should be set out in a document to avoid misunderstandings in the future. You need to think not only about who is going to pay:

• the deposit on the purchase of the property or any cash contribution towards its price;
• the ongoing maintenance and insurance of the property;
• the servicing and repayment of any mortgage loan applicable to the property;

but also

• the possibility of additional co-owners being brought in or existing co-owners disposing of their interest in the property, either to the remaining co-owners or to third parties; and
• the eventual sale of the property and division of proceeds of sale

All the above should be recorded and regulated by a Declaration of Trust Deed or Co-ownership Agreement. You should ensure that you instruct your solicitor at an early stage if you wish such a Deed or Agreement to be prepared for approval by both or all of the co-owners in advance of completion of the purchase. Preparing the Deed or Agreement will involve additional costs in excess of those quoted for the purchase of the property. You may wish to take advice independently from your proposed co-owner.

© Copyright plainlaw 2011

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