If you are living with someone else as a couple or intending to do so it is prudent to consider your legal position carefully. It may not seem very romantic …… but plans made properly now may save a lot of heartache, expense and worry later.
Jointly owned property:
If you and your partner intend to own property jointly you will be given the option to hold the legal title in one of two ways:
Tenancy in Common: In these circumstances the interests of the joint owners are separate and distinct. A note will be made on the Land Registry record confirming this – known as a “restriction”. There may or may not be a formal Deed of Trust recording each parties entitlement. Should one owner die – their share will not automatically pass to the survivor.
Joint Tenancy: In these circumstances there will be no formal division of the joint owners interests in the property – by for example a Deed of Trust. In the event that one owner should die their share in the property will pass automatically to the survivor – regardless of the provisions of their Will.
It may seem simpler to hold the property as joint tenants. In light of a recent court decision (Stack v. Dowden) we would usually advise that you hold as Tenants in Common with a Deed of Trust expressly specifying your respective interest in the property. Stack v. Dowden decided (amongst other things) that if property is held in joint names and there is a later dispute about ownership the court will start from the assumption that each party is equally entitled to share the value in the property. This may be unfair if for example the parties have made unequal contributions.
If you are intending to purchase a property jointly with another consider the following questions:-
- How is the purchase being funded? Will each party make identical contributions of capital – or contribute equally to any mortgage?
- How do you intend to share any uplift (or decrease) in the value of the property? Options might include equal division or division according to the extent of each party’s contributions.
- What do you intend should occur if one of you should die? Options include arranging for the deceased owner’s share to be passed to the survivor either outright or by providing for a continuing right of occupation. In these cases there may need to be consideration of life insurance – to ensure that any outstanding mortgage can be redeemed. You may need to plan testamentary provision to ensure the needs of your surviving co-habitee are met – together with those of any other dependants or loved ones – such as the children of a previous relationship or others who might bring a claim against your Estate.
- What do you intend should occur if there is any unforeseen change of circumstances – such as ill-health preventing one of you from working or other loss of capacity. Consideration may need to be given to the creation of Lasting Powers of Attorney (see separate detailed note) and appropriate insurances.
- What do you intend should happen if the relationship breaks down? If agreement cannot be achieved the court may intervene to determine whether or not the property should be sold and who has rights of occupation in the interim. Tailor made advice as to the circumstances of each case is necessary – but advanced planning and professionally drafted documents can alleviate uncertainty.