How you own your house really matters
Imagine the situation. You and your new found love have decided to take the plunge and buy a home together, a gorgeous flat for £100,000. You have your £50,000 deposit but your partner doesn’t have quite as much as you to contribute to the deposit, just £5,000. You agree to pay the mortgage of £45,000 on a 50:50 basis.
Never mind you say, we’ll live together in happiness and money won’t matter. What’s yours is mine and mine is yours...
Then, unfortunately, the relationship comes to an end. You expect to get your money back but things aren’t always as expected.
And it all boils down to whether you bought the house as Joint Tenants or Tenants in Common.
These are simple terms that relate to how two or more people can own a property.
You can own a property as:
Joint Tenants in equal shares;
Tenants in Common in equal shares; or
Tenants in Common in unequal shares
Both the methods of ownership effect how your interest in a property is calculated, for example when a couple separate and want to split the value of the asset but it also determines what happens when one of the owners dies.
If you decide to own a property as Joint Tenants then irrespective of how many owners there are and irrespective of what they may have contributed to the purchase, you each own an equal share. So in our scenario above if the couple owned as joint tenants each would be entitled to an equal share of the house, in spite of the fact that one party contributed much more to the original purchase.
Tenants in Common can own a property in equal shares or unequal shares. You could own a property 50:50, 60:40, 10:20:70 or in any other shares depending upon what you agree when you purchase the property. If you split in this scenario you are entitled to your agreed share of the assets.
If, after buying a property as Joint Tenants, you want to change to Tenants in Common you can issue what is called a Notice of Severance on the other owners. This won’t change your share of ownership but it will effect who inherits your share.
There is a simple way to protect your investment. When purchasing the property you can have a Deed of Trust prepared. This can set out in detail how you will own the property, what shares you own the property in and what will happen with your share if you separate. For example you could have a deed that ensures that on separation you each get your deposit back plus 50% of any increase in the value of your property. Alternatively you could own the property in fixed percentages i.e. 60:40. Most conveyancers will advise upon and prepare a Deed of Trust at the same time as they are dealing with your purchase.
It’s often only when couples separate that they realise the importance of owning their property as Joint Tenants or Tenants in Common and it’s family lawyers who end up trying to unravel things for them.
For married couples the difference is not so important as the presumption is that spouses each have an equal interest in the property irrespective of ownership, however if you own as Joint Tenants you may want to sever the Joint Tenancy if for example you did not have children together and wanted your share of the house to go to someone nominated in your Will.
For advice on the split of assets when a relationship breaks down call 0800 321 3832.