With house in the UK becoming increasingly expensive, more and more people are choosing to buy property with someone else. That’s either buying as a couple (married or unmarried), or you might team up with friends or siblings to pool your resources and buy a house together. In some cases, parents share ownership with their adult children to give first-time buyers their chance to get on the housing ladder.  

When you buy property with another person, there are a couple of ways to structure the joint ownership. They have slightly different legal implications for you, so it’s worth thinking about which option works best for your circumstances. 

Joint tenants 

One way for two people to own a house together is to become joint tenants. That means that both people own the whole property and they each have equal rights to it.  

The first thing to know about joint tenancy is that if you sell the property, you are each entitled to 50% of the proceeds. So, if both partners are contributing similar amounts to the purchase price and contribute to the mortgage in equal proportions while you live in the property, then joint tenancy may be an appropriate option. 

The other thing to be aware of is that if one of the joint tenants dies, then the property automatically passes to the other joint owner. For married, or co-habiting couples, that may be their desired intention. But if you want to leave your share of the house to anybody else (children from a previous marriage for example), then there’s no way to do that in a joint tenancy situation. You can’t override that rule by leaving your share of the property to somebody else in your will. 

Generally, it’s usually married couples or long-term co-habiting couples that tend to choose joint tenancy.  

If the relationship breaks down, then you have the option to sever the joint tenancy and become tenants in common. That way, you can decide that one person receives more of the sale proceeds when you come to sell the house. The reason you might do that is to be fair to the partner who contributed more to the purchase price, if you had unequal nest-eggs to contribute. Or, you may want to reflect that one partner has paid higher monthly contributions towards the mortgage. 

Tenants in common 

The other option for ownership is for both people to have specific shares in the property. You can choose to own your shares 50-50, or you can decide that one person has a larger share than the other. 

Tenants in common is a more flexible structure. Your ownership percentages can vary over time if you want to. For example, one person may contribute 75% of the deposit, while the other person contributes 25%. But if that person earns a higher wage and pays a higher proportion of the mortgage every month, you can alter your percentages. You may choose to change to a 60% / 40% ownership instead. 

The other main differentiator from joint ownership is what happens if you die. As a tenant in common your share won’t automatically transfer to the other owner(s). Instead, you’re able to give your share of the property to somebody else in your will. 

The people who tend to choose to hold property as tenants in common include: 

  • Friends who are clubbing together to buy a house.
  • Parents who are buying with adult children to help them onto the property ladder.
  • Couples where one person contributes a larger share of the deposit.
  • Couples where one person will pay off a larger proportion of the mortgage. 

Declaration of trust (also a Deed of Trust) 

If you’re buying property as tenants in common, you enter in a declaration of trust with your other owners. This deed will record the financial arrangements of each party and set out what happens in various circumstances (such as selling the property). 

It’s also a good idea if one of the owners is not named on the mortgage. There are all sorts of reasons why one person may not be named on the mortgage. They may recently be self-employed and not yet have two years of accounts. Or they have a poor credit rating. Or, because they’ve moved into a house which is owned by the other person.  

A declaration of trust will protect both/all the people living in the house, making it clear how money is to be apportioned later. 

Solicitor’s advice 

A solicitor will be able to advise you on the consequences of each ownership structure for you. We look at your circumstances and advise you on the way the law will affect your choice of ownership.  If you’d like to have a chat about your options, please don’t hesitate to contact us.