It is not uncommon for those purchasing a house together, whether as a home or an investment, for one person to contribute more financially to the purchase price at the outset. More often than not, the person introducing a larger contribution wishes to protect their investment should the relationship breakdown and/or the property is sold in the future.
When purchasing a property with one or more people, there are two ways in which you can own the property:
Where each of you own the entirety of the property and should one person die the deceased’s share in the property automatically passes to the surviving property owner(s). If the relationship breaks down and/or the property is sold at a later date, the net sale proceeds are divided equally between all the owners irrespective of unequal contributions to the purchase price and throughout the property ownership.
Tenants in Common
Where each of you owns a share in the property (which are specified and can be equal or unequal) and should one person die, their share would not automatically pass to surviving property owner(s) but under the terms of their will (or the intestacy rules if they do not have a will). If the relationship breaks down and/or the property is sold at a later date, the net sale proceeds are divided between the property owners proportionally in accordance with the shares that they own.
Sometimes purchase documents do not accurately record the financial contributions and mutual intentions of the individuals at the outset of a purchase transaction. If you are making a larger financial contribution and it is not documented properly, you could inadvertently gift some of your investment to your co-owner.
Protecting your money
It is extremely important that if you want to protect a larger monetary contribution, whether it is to the initial purchase and/or future financial costs of running the property, that your mutual intentions are recorded at the outset to help prevent potential disputes later down the line.
These can be accurately recorded in a declaration of trust and/or a cohabitation agreement. Compared to the costs of court proceedings that can follow if a dispute arises, these costs are minimal.
Our specialist family lawyers can advise you on how to protect your assets and investments.