What to consider when Buying a Property or Moving In with your Partner

Some couples believe that because they are living with a partner their relationship is a common law marriage. Unfortunately, this is not a recognised legal term in the UK. Unlike married couples or civil partners, cohabiting couples have fewer legal rights and so it is important to consider your intentions at the outset.

How the property owned

Unless one of you is the sole owner. There are two basic ways that couples can jointly own a property.

Joint Tenant

Unless otherwise stated, co-owners are normally listed as joint tenants of the property. This means that you both own the entire property, regardless of who purchased it. You cannot sell the property without the other owner’s permission, and you cannot get a separate mortgage for your share. You will both be jointly and severally liable for the mortgage payments.

Unlike tenants in common you cannot leave your share of the property to somebody in your Will, including children, as your share of the property will automatically pass to the other owner.

A joint tenancy agreement is ideal for couples who wish to leave the property to each other.

Tenants in Common

Unlike joint tenants, tenants in common both own a specified share of the property that they purchased e.g. 50% and 50%.

Shares in the property do not have to be equal. For example, if you purchased a property at a value of £300,000 – Person A puts down a higher deposit of £24,000 and Person B puts down a lower deposit of £6,000. The interest of the property can be divided as 80% for Person A and 20% for Person B.

A tenancy in common is ideal for people who have made unequal contributions to the property or wish to leave their share of the property to someone else when they die. This can include children from a previous marriage so as to guarantee that their children will benefit from their estate when they die, provided they have written a Will.

If you wish to purchase a property as tenants in common, it is important to ensure that you state this to your conveyancer to avoid be.

How to protect your financial interest as a cohabitant

Before purchasing a property with somebody you should discuss with the other owner what will happen if your relationship were to break down and consider entering into the following: –

1. A declaration/deed of trust – This is a legally binding agreement which sets out each person’s interest in the property. You would have to own the property as tenants in common and you can protect your share of the property and determine how funds will be distributed should your relationship break down and you need to sell the property.
2. A cohabitation agreement – Its terms are wider than a deed of trust and can incorporate family circumstances and set out rights and obligations that each person purchasing the property will make to the other should the relationship break down. This can be particularly useful if a parent has gifted money to their child to purchase a property and you want to ensure that this is repaid.
3. Creating a Will that makes a financial provision for the other in the event of death. (Our Wills team can help with creating and updating Wills).
4. Seek independent financial advice from an accountant or other wealth management professional if there are pensions and other assets. For example, if you need to nominate a pension beneficiary.
5. Consider seeking specialise tax advice on Inheritance and Capital Gains Tax implications.

FAQS
What if my relationship has broken down and we do not have a cohabitation agreement or deed of trust?

You should make an appointment with a solicitor who can advise what your legal rights are before entering into negotiations with the other party.

If negotiations are not successful, you may be able to make a claim under the Trust of Land and Appointment of Trustees Act 1996 or Schedule 1 of the Children Act 1989 if there is a child of the family.

What if I moved in with my partner who already owns the property solely?

If a property is purchased in one person’s name, the second person is not legally entitled to anything under cohabitation law, even if they have paid towards renovating the property, the mortgage, bills or left work to raise children. It is important to consider entering into a cohabitation agreement if you are planning on living with somebody and will be contributing financially to the property.

I purchased a property as joint tenants and now I want to change this to tenants in common?

You can do this by severing the joint tenancy. We can assist with this and advising you on your options and rights.