Whose house is it anyway? How to protect your investment when buying a house with someone else

Buying a house is one of the scariest (at least your first time round, but perhaps not even then!) and most expensive things we do during our lifetimes. The Covid pandemic has resulted in us spending more time at home than ever before and, if you are anything like me, you will have been using the extra time for some much needed DIY – or at least planning the renovations you want for when lockdown ends and you can get the decorators and builders in.

 

Such an expensive investment means that is crucial to protect the interest you have made in that property, no matter how small you think that nugget of equity is. 

 

 

There is still a Buying a house is one of the scariest (at least your first time round, but perhaps not even then!) and most expensive things we do during our lifetimes. The Covid pandemic has resulted in us spending more time at home than ever before and, if you are anything like me, you will have been using the extra time for some much needed DIY – or at least planning the renovations you want for when lockdown ends and you can get the decorators and builders in. Such an expensive investment means that is crucial to protect the interest you have made in that property, no matter how small you think that nugget of equity is. The Stats There is still a gender pay gap in this country so protecting your money is more crucial than ever. The money you put into a property represents maybe years of saving, and could be crucial later when you reach pension age – women still lag men at having a much lower income in retirement. Thinking long term and protecting yourself is an excellent way to prevent being part of a worrying statistic. The Office for National Statistics (the ONS) has confirmed that the number of cohabiting couples is growing faster than married couples or lone parent families with an increase of 25.8% over the course of a decade. These couples will no doubt be bringing different incomes and investments to the purchase of a property together. Not all relationships work out – it's a simple fact of life and it's important to have your practical head on when buying a property with a partner, however exciting and romantic the prospect of buying a home together might be. How can you protect your investment should things not work out? According to research, 24% of British people wrongly believe that if they co-own a property with their partner and are not married, ownership would pass automatically to them on their partner's death. This is a worrying statistic. It is hugely important to remember that a cohabitee is not treated as a spouse and the same rights are not afforded to you. Making sure that the financial impact as minimised if a break up occurs is common sense. There are practical considerations to think about when making the biggest purchase of your life so it's important to have these in your mind when you start thinking about buying somewhere. Legal title – whose name is on the deeds? There may be financial reasons why a property is purchased in one person's name but with the intention that the other person or partner live at the property and treat it as a joint asset, even though only one person's name is on the deeds. The ability to obtain a mortgage may be one of these reasons but it leaves the unnamed partner very vulnerable. They have no control over whether the property is sold or charged further (ie additional lending made against the property) and all lenders will insist that they sign an occupier's consent form. An occupier's consent form states that if the borrower falls behind on their mortgage payments, they will not maintain any right or interest in the property and will immediately vacate the property if requested by the lender. Even if you are sharing the mortgage payments, you have very little protection here. Ensuring you are one of the legal owners is the best way to protect you and the money you have put into the property. Jointly owned property – there is more than one way Property can be held in two main ways; joint tenants or tenants in common in equal shares. When you purchase a property jointly with a partner or friend, you may contribute different amounts to the initial deposit or you may have plans to contribute unequally to the mortgage payments. This is usually recorded in the transfer document you sign at completion but can sometimes be outlined in a separate declaration of trust. Owning as joint tenants means you have equal rights to the whole property with the other owner and, if you die, the property will automatically pass to the surviving owner. This means your whole share in the house becomes theirs. This may not be what you want – especially if you are unmarried and perhaps want to protect your money should you break up. As tenants in common, you can own different shares of the property, and if you die, your share will pass under the terms of your will rather than going automatically to the other owner (make sure you draft a will!) You may also find your circumstances change after you have bought your home and how you hold the property may need to be updated. If you get divorced or separate from your partner, you might want to ensure that your share in the property is ring fenced and will not pass automatically to your ex partner. Another example of where a declaration of trust may need to be re-written would be if you received some funds (maybe from an inheritance) which you wanted to invest in the property and use to pay off some of the mortgage or purchase a share from your partner. A new declaration of trust could be drafted to reflect this. It is crucial that you take professional legal advice to make sure that such a document is effective and achieves what you want as there may be tax or other implications that you are not aware of. We can help with this. Property fraud Protecting an interest you have in a property from third party fraud is also very important and I wanted to add this here as my third point as there has been an alarming rise in property fraud where a property has been sold or mortgaged without the consent of the registered owner. You are more at risk if you do not live at the property (it may be empty or rented out), if the property is not mortgaged or if the property is not yet registered with the Land Registry (older properties which have not been sold or transferred for several decades are more likely to be unregistered). If these circumstances apply to you, please do get in touch to discuss how we can protect you and your property. There are a number of restrictions which can be registered against the title (ie on the deeds) which would ensure that you have extra protection. For example, we can include a restriction requiring a solicitor to confirm that the person signing the transfer document is also the registered proprietor. The Land Registry property alert system is one of the best protections available against property fraud, and is a free service. Once you have set up an account, you can have up to 10 properties covered. Any application to the Land Registry will then automatically trigger an email to be sent to you with details of the application, including who has submitted the application. The website for setting up the property alert is https://propertyalert.landregistry.gov.uk/ Whether you treat your house as an investment or your forever home, it is important to ensure it, and your money, is properly protected. Please do get in touch if you have any questions or if you require any additional advice or help. Gender pay gap in this country so protecting your money is more crucial than ever. The money you put into a property represents maybe years of saving, and could be crucial later when you reach pension age – women still lag men at having a much lower income in retirement. Thinking long term and protecting yourself is an excellent way to prevent being part of a worrying statistic. 

 

The Office for National Statistics (the ONS) has confirmed that the number of cohabiting couples is growing faster than married couples or lone parent families with an increase of 25.8% over the course of a decade. These couples will no doubt be bringing different incomes and investments to the purchase of a property together. Not all relationships work out – it's a simple fact of life and it's important to have your practical head on when buying a property with a partner, however exciting and romantic the prospect of buying a home together might be. How can you protect your investment should things not work out? 

 

According to research, 24% of British people wrongly believe that if they co-own a property with their partner and are not married, ownership would pass automatically to them on their partner's death. This is a worrying statistic. It is hugely important to remember that a cohabitee is not treated as a spouse and the same rights are not afforded to you. Making sure that the financial impact as minimised if a break up occurs is common sense. 

 

There are practical considerations to think about when making the biggest purchase of your life so it's important to have these in your mind when you start thinking about buying somewhere. 

There may be financial reasons why a property is purchased in one person's name but with the intention that the other person or partner live at the property and treat it as a joint asset, even though only one person's name is on the deeds. 

 

The ability to obtain a mortgage may be one of these reasons but it leaves the unnamed partner very vulnerable. They have no control over whether the property is sold or charged further (ie additional lending made against the property) and all lenders will insist that they sign an occupier's consent form. 

 

An occupier's consent form states that if the borrower falls behind on their mortgage payments, they will not maintain any right or interest in the property and will immediately vacate the property if requested by the lender. Even if you are sharing the mortgage payments, you have very little protection here. 

 

Ensuring you are one of the legal owners is the best way to protect you and the money you have put into the property. 

 

 

Property can be held in two main ways; joint tenants or tenants in common in equal shares. 

 

When you purchase a property jointly with a partner or friend, you may contribute different amounts to the initial deposit or you may have plans to contribute unequally to the mortgage payments. This is usually recorded in the transfer document you sign at completion but can sometimes be outlined in a separate declaration of trust. 

 

Owning as joint tenants means you have equal rights to the whole property with the other owner and, if  you die, the property will automatically pass to the surviving owner. This means your whole share in the house becomes theirs. This may not be what you want – especially if you are unmarried and perhaps want to protect your money should you break up. 

 

As tenants in common, you can own different shares of the property, and if you die, your share will pass under the terms of your will rather than going automatically to the other owner (make sure you draft a will!) 

 

You may also find your circumstances change after you have bought your home and how you hold the property may need to be updated. If you get divorced or separate from your partner, you might want to ensure that your share in the property is ring fenced and will not pass automatically to your ex partner. 

 

Another example of where a declaration of trust may need to be re-written would be if you received some funds (maybe from an inheritance) which you wanted to invest in the property and use to pay off some of the mortgage or purchase a share from your partner. A new declaration of trust could be drafted to reflect this. It is crucial that you take professional legal advice to make sure that such a document is effective and achieves what you want as there may be tax or other implications that you are not aware of. We can help with this. 

 

 

Protecting an interest you have in a property from third party fraud is also very important and I wanted to add this here as my third point as there has been an alarming rise in property fraud where a property has been sold or mortgaged without the consent of the registered owner. 

 

You are more at risk if you do not live at the property (it may be empty or rented out), if the property is not mortgaged or if the property is not yet registered with the Land Registry (older properties which have not been sold or transferred for several decades are more likely to be unregistered).

 

If these circumstances apply to you, please do get in touch to discuss how we can protect you and your property. There are a number of restrictions which can be registered against the title (ie on the deeds) which would ensure that you have extra protection. For example, we can include a restriction requiring a solicitor to confirm that the person signing the transfer document is also the registered proprietor.

 

The Land Registry property alert system is one of the best protections available against property fraud, and is a free service. Once you have set up an account, you can have up to 10 properties covered. Any application to the Land Registry will then automatically trigger an email to be sent to you with details of the application, including who has submitted the application.

 

The website for setting up the property alert can be found here.

 

Whether you treat your house as an investment or your forever home, it is important to ensure it, and your money, is properly protected. Please do get in touch if you have any questions or if you require any additional advice or help.