joint property

If you’re buying a property that needs a little ‘TLC’ (or perhaps a lot!) and are planning on renovating it, there are some important factors you should consider.

Are you buying the house in your sole name?

Ask yourself whether a friend or unmarried partner may live with you in the property in the future. Even though the legal title to the property is in your sole name, a person living in the property with you may make a claim for a share in it should you later separate. A Cohabitation Agreement seeks to debar any such claims and protect your property. Further information on Cohabitation Agreements is available here.

Even where a person does not contribute financially to your property, if they make significant non-financial contributions (such as manual labour), they may still have a claim against it for an interest. If you a cohabitee is assisting you with any renovations it is important that you protect yourself and your property from claims by them.

Are you buying the house in joint names?

If you plan on jointly buying a Property and intend to contribute significantly more than your partner to renovations, you may want to take steps protect your investment.

The first step is to seriously consider how you wish to hold the Property. You can either own a property as joint tenants or tenants in common. Which type of ownership you choose will dictate if your interest the property can be held in unequal shares and what happens to your share in the property on death.

It is important to note that in any type of joint property ownership there is a presumption that the property equity is owned equally between the joint legal owners. So, if you want to change that presumption, it is important to put in place the proper documents to confirm that, or you could face a protracted and expensive legal battle attempting to recover your investment.

What documents do you need?

There are two documents that we advise can be put in place to protect your investment in a property: either a Declaration of Trust or a Cohabitation Agreement. Whilst we recommend that you put one of these documents in place at the time your property is purchased, it is not too late to put one in place after purchase.

A Declaration of Trust

If you would like yours and your co-owners’ respective shares in the property to vary, for example if you plan to spend £45,000 on a new extension and want to protect this investment, then it is imperative that you seek advice on putting in place the relevant documents to achieve this. Otherwise, there is a significant risk you will not be able to claim that investment back should you later separate and sell the Property.

A Declaration of Trust is a legally binding deed which confirm who owns the shares in a property. Please note a Declaration of Trust must be prepared properly to be legally binding.

Your interests can either be calculated on a percentage basis or in specific monetary shares (if for example you wish to ‘ring fence’ a sum you have invested).

In the unlikely event your relationship breaks down or one of you die, your respective interests in the Property will be distributed in accordance with the Declaration, so it is vital you are properly advised as to the implications of the Declaration.

It is often the case that the making of a declaration of trust is often overlooked when a Property is purchased, leading to disagreements and disputes in the future. The benefit of having a declaration of trust is that there will be certainty as to how the beneficial ownership of the Property is held.

Cohabitation Agreement

A Cohabitation Agreement is a document which confirms the rights and responsibilities of each party in respect of the property, finances, savings and other outgoings. It can also deal with arrangements if the relationship ends and seeks to debar the various claims that can be made by each party against the other, the property, or the Estate of the other on death.

We often recommend that a Declaration of Trust is contained within the Cohabitation Agreement to offer as much protection as possible.

You can read more about Cohabitation Agreements here.

What if my parents have gifted me money to help with renovations?

If you jointly own a Property and you and your co-owner’s relationship breaks down, and you have not put in place a Declaration of Trust or Cohabitation Agreement, you may not be able to ‘ring-fence’ as a sum payable to you and your cohabitee therefore may be able to claim part of your parents’ gift. There are claims available to parents to seek to recover their contributions, however such claims are extremely costly and may outweigh their financial contribution altogether. A Cohabitation Agreement and/or a Declaration of Trust can protect your parents investment also.