Fed up with renting? Shared home ownership could be the way out. Young singles who find buying a home on their own a distant dream are now finding that by clubbing together with a friend or another family member they can afford to buy a home on a shared ownership basis.
Here at Homeward Legal we have seen a considerable upsurge in the number of people who find that this form of joint or shared ownership gives them a route out of ‘generation rent’ and a stake in their own home.
You don’t have to be a couple planning on marriage or a civic partnership – although many such couples also buy a home together long before they tie the knot. Mortgage lenders will now consider joint applications from people getting together to share ownership for whatever reason.
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Who pays what? Consider the longer term as well as the initial purchase
But before rushing out with your best friend to put down a deposit on your new home you should sit down and carefully consider a few things. It is obviously essential to sort out your finances, but it can also be a good idea to get a bit of legal advice before committing yourselves to a property.
You will need to consider not just the immediate purchase of the property but the longer-term arrangements. For instance
- Who is putting in the money for the deposit and in what shares?
- Are you getting any gifts or loans from other family members?
- How are mortgage repayments and other costs to be shared?
- What happens if one person loses their job or suffers a serious accident and can no longer contribute?
- When the property is eventually sold how will the proceeds be split?
It is advisable to have a separate legal document drawn up to record the detailed arrangements for the ownership of the property. This is known as a trust deed, and your Solicitor will be able to give more advice about this. A separate fee may be payable for this deed.
Which form of joint ownership is suitable for you?
One important point which you will need to think about is the way in which you want to own the property, as there are two methods of joint ownership. When the joint owners are not a married couple or in a civic partnership it is recommended that they hold as ‘tenants in common’ – the word ‘tenants’ here has nothing to do with renting the property, it is just used in its older sense of someone who owns or ‘holds’ property.
(With the other form of joint ownership – known as ‘joint tenancy’ – the property will automatically pass to the sole ownership of the surviving owner when one dies.)
What does ‘tenants in common’ mean?
When two or more people own property as tenants in common they can either have equal shares or proportion their shares in whatever ratio they choose, e.g. 60:40. This would mean that when the property is sold the net proceeds will be split accordingly.
You will need to tell your solicitor if you want anything other than equal shares, so that this can be recorded either on the transfer deed or any trust deed.
One advantage to owing as tenants in common is that the property cannot be sold or re-mortgaged unless all the joint owners join in. The land registry will put a notice on the title register to this effect.
Even if the worst happens and one owner dies, the other cannot sell the property in their sole name but must appoint another person to agree to the sale. This will preferably be the executor of the owner who has died, and for that reason it is always a good idea when buying a shared ownership property if all owners make their wills at the same time.
Homeward Legal will be happy to help with any queries you may have about shared ownership. Our network of solicitors will be able to give advice on all questions about joint ownership, just give us a call on 0800 038 6699.
If you’re a first-time buyer, check out Homeward Legal’s comprehensive First-Time Buyers’ Hub where all your questions about purchasing for the very first time are covered in detail.