Buying property in joint names

A house or flat is often purchased in the names of more than individual, i.e. “jointly”.  In such circumstances, consideration must always be given to the manner of such joint ownership and its consequences.

Ignoring for the purposes of this article property purchased by business partners, private individuals have the options of either a “joint tenancy” or “tenancy in common”.  The word “tenancy” in this context can sometimes be a little confusing but it is no more than a label and does not infer any relationship of landlord and tenant.

Either freehold or leasehold property may be purchased in either manner.

The most appropriate option will depend on the particular circumstances of each individual case but failure to consider the matter at the time of the original purchase can often lead to unfortunate problems at a later date.

Imagine perhaps a couple intending to purchase a new home together.  They are unmarried but each have a child or children from previous relationships.  Possibly, funds for the new purchase are also to be provided by them in unequal shares.  They may wish to reflect their unequal contributions (either to the deposit, purchase price or to subsequent expenses) with a view to any later sale proceeds being also divided in those same shares.  They may also prefer that should one of them die, their share of the property pass to their children rather than to their new partner.

In these circumstances, it would be essential to adopt the “tenancy in common”, to also have prepared a separate “Declaration of Trust” (defining in more detail those respective interests) and to ensure they each have up-to-date Wills disposing of their distinct shares in the property in the event of their death.
Were they to opt, by contrast, for the “joint tenancy”, then should one of them die, the entire property will pass automatically to the surviving joint owner to the detriment of the deceased’s child or children.
Furthermore, in the event of a relationship breakdown, sale proceeds from the property would be divided equally notwithstanding the inequality of earlier financial contributions by the parties.

Whilst the prospect of either a relationship breakdown or death may not be things you really wish to consider when buying your new home, failure to do so can have disastrous consequences.

With rising property prices, it is also becoming increasingly common for two or more friends to purchase their first property together.  In these circumstances, again it is essential they discuss with their legal adviser prior to completion of their purchase how they are to record their respective rights and obligations in respect of the property and, particularly, how proceeds are to be distributed between them in the event of a future sale.  Consideration has also to be given to the mechanism by which remaining owners might be required to “buy out” the share of another co-owner who no longer wishes to be bound to that joint venture but perhaps wishes to purchase another property in his or her own right or with a new partner.

Where a mortgage is obtained to assist with the original purchase, the obligations owed by the joint owners to the lending bank or building society are “joint and several”.  The lender may not be willing to release one of the co-owners simply because he or she no longer wishes to reside in the property.  The continuing obligation to that original lender is likely to prevent that individual from obtaining another mortgage to purchase property elsewhere.

It is therefore vital that such matters be discussed in detail with your legal adviser prior to any purchase.  Failure to do so can create uncertainty and prove very costly both in terms of legal fees for each party and causing increased stress and anxiety at a time when least required.

This article aims to supply general information but it is not intended to constitute advice.  Every effort is made to ensure that the law referred to is correct at the date of publication and to avoid any statement which may mislead.  However, no duty of care is assumed to any person and no liability is accepted for any omission or inaccuracy.  Always seek specific advice. 

Capron & Helliwell Solicitors offer a range of legal services at the firm’s Stalham and Wroxham offices near North Walsham and Norwich in Norfolk. The firm specialises in areas including family law, conveyancing and private client law including wills and probate. Capron & Helliwell Solicitors offer free family law clinics – please call 01692 581231 for further details or to make an appointment.