Most unmarried couples considering stepping onto the property ladder for the first time will be, quite rightly, extremely excited and will not be focusing on the finer details and consequences of this big adventure. We have therefore created a short list of considerations that you and your other half should discuss before you go down this path.
Whilst many of the below considerations will also apply to married couples, we have focused on unmarried couples in this article.
1. Who is footing the bill?
When buying for the first time it is not uncommon for a couple to be contributing unequal amounts to their deposit or the ongoing mortgage payments.
It is important to ensure that you are both clear at the outset on your financial obligations to one another, and to your mortgage provider. Most mortgage providers will insist on lending the mortgage funds on a ‘joint and several’ basis. This means that, should you default on a payment or for any reason the mortgage provider decides to call in the loan, you are both responsible for the entire mortgage amount. Therefore, the mortgage provider has the discretion to pursue both of you or just one of you!
2. Are you going to own separate shares and, if so, what shares?
When two or more people own property together it is possible to own it either as ‘Tenants in Common’ or as ‘Joint Tenants’ and my colleague, Jane Whitfield, has prepared an easy guide to understanding the difference between the two which can be found here: Tenants in Common vs Joint Tenants.
In brief, if you are Tenants in Common you will each own a divisible share of the property (whether equal or unequal) and if you are Joint Tenants you will both own the entire property.
The importance of this lies when either one or both of you no longer wish to own the property. This could be because you are selling jointly, one of you wishes to buy the other out, or if one of you were to pass away.
If you have decided at the outset of your purchase how you are going to own the property it can save you time, money, stress and heartache should the ownership come to an end.
If you would like to discuss the shares in which you wish to own your property and to put this into a formal agreement then please contact Charlotte Fox, whose details are at the bottom of this article, and who would be glad to assist you.
3. The dreaded break-up!
When buying your first home no couple wants to think about breaking up, but it is something that should be considered in light of the huge financial, and emotional, commitment you are both making.
This comes back to the way in which you own the property and putting in place documentation to confirm the same. This document is known as a Declaration of Trust and can be used to outline the distinct shares that you own, how your mortgage and monthly outgoings are going to be paid, as well as what will happen if one or both of you wishes to end the relationship. This document can also account for how your shares would be calculated if either of you passes away: Remember that to pass on your shares after your death, you must outline your wishes in your will.
It is important to account for such scenarios when they are simply a hypothetical event that you would prefer never to consider. If you leave these decisions and discussions too long, and break-up in the meantime, you are likely to end up negotiating with your ex-partner at an emotional and stressful time where you will not necessarily make the best decisions.
4. What if one of you passes away?
Like a break-up, nobody wants to entertain the idea that one of you may die while owning your first home but, again, it is important to consider and ensure that you are both satisfied that you have planned for this scenario.
This starts with how you own your property; if you own your house as Joint Tenants (where you both own the whole property) the property will pass outright to the surviving joint owner by survivorship. This will result in the survivor owning the entire property and being free to sell, move, add a new partner to the title, etc. This will happen regardless of the relationship between the two owners (married/unmarried/friends/siblings/etc.)
If you own your house as Tenants in Common (where you each own a divisible share) the deceased’s share will pass in accordance with their Will or Intestacy (where someone dies without a Will).
The Intestacy Rules currently state that, if an unmarried individual with no children dies then their share will pass to immediate family members in this order; parents, siblings, grandparents, aunts and uncles. This, of course, may not be in accordance with your wishes and so it is important, when buying a property, to consider preparing a Will to dictate where your share, and other assets, should pass on your death.
If you would like to discuss preparing a Will then please contact Charlotte Fox, whose details are at the bottom of this article, and who would be glad to assist you.
Of course this is not an exhaustive list of aspects to consider when buying a property! As above, if you would like to discuss a Declaration of Trust, Will, or any other considerations when buying for the first time then please contact Charlotte Fox, one of the solicitors in our Private Client team in Reading on 0118 958 9711 or [email protected].
Alternatively, if you would like assistance with your conveyancing (the legal process of buying/selling a property) then please contact the conveyancing team in Reading on 0118 958 9711.