Are you thinking of buying a home with your partner?
We have all been through a lot together over the last 4 months and for some spending more time together has cemented their relationship and are now ready to take the next step in their relationship and buy their first home together.
All relationships are different, you could be first time buyers, a couple who have been married before, or have children from previous relationships. What ever your circumstances, you need to understand how the different types of home ownership, impact on your decision how you should own your new home.
When you buy a property, your conveyancer will ask you how you want to own the property? You have two opinions “Joint tenants”or “Tenants in common” but what does this really mean?
A Joint Tenancy means that you and your partner buy the property in equal shares. It also means that if one of you dies, your home will automatically be given to the other, by what is known as “Survivorship”. This means that your interest in the home will not be dealt with under any provisions of your Will.
However, owning your home as Joint Tenants may not always be your best option. Traditionally most properties bought by couples were Joint Tenancies. However, modern family dynamics are very different to what they were 30 years ago. Your home is usually your main asset and should the worst happen, you might not want your interest in the property to be given to your partner by survivorship. This is especially true if you have children from a previous relationship and want to leave your interest in your home to your children. What most people do not realise is, even if you have a Will that provides for your children, if you own the property as joint tenants, your interest in the property will automatically be given to your partner and will not be inherited by your children. This means you would inadvertently disinherit your children from your interest in your home if you owned the property as Joint Tenants.
The other issue with Joint Tenancies is when one of you contributes significantly more to the purchase of your home than the other. As Joint Tenants, there is a presumption that you own the property in equal shares. You could find yourself losing half of your contribution and it is unlikely you would be successful in challenging the position through the courts.
The simplest way of protecting your financial contribution in your home is to define your interest before you buy. By owning your property as Tenants in Common your interest is clearly defined at the outset. So should the worst happen your interest in the home can be left to your loved ones under the terms of your Will. It also means that should you part company in the future, your shares in the property are defined, so any financial contribution you put down on the property will be protected.
If you are making equal contributions to the purchase price, but want to leave your interest in the property to family member in event of your death, you can simply instruct your conveyancer that you want to own the property as “Tenants-in-Common” in equal shares. By registering your respective ownership in this way, you will then leave your interest in the property under your Will.
If you or your partner are contributing unequal capital to buy your new home, then as well as owning the property Tenants-in-Common in unequal shares, you should also enter into a Declaration of Trust, which clearly sets out your respect interest in the property. Along with defining your respective shares, it can also include additional provisions, such as who is to meet what proportion of the mortgage payments, what happens in either of you are unable to pay your share of the mortgage and what happens if you separate. Having a well drafted Declaration of Trust, means that you both know where you stand at the outset and provide reassurance if for any reason you decide to part company.
Unfortunately, disputes over jointly owned property can be complicated and expensive. Making sure you have any potential issues resolved when you buy the property, means you can get on with living your lives, safe in the knowledge that your interests are protected.
If you currently own your home as Joint Tenants, but did not understand how this type of ownership would impact on family inheritance. Please do not worry and get in touch, we can help you sever the tenancy on the property, allowing you to make a Will which can provide for your loved ones in the event of your death.