Buying property together is a significant commitment for any couple. It involves much more than choosing a house you both love and securing a mortgage. For cohabiting couples who are not married or in a civil partnership, there are critical legal considerations to take into account. It doesn’t matter whether you’re in a long-term relationship, newly living together, or planning to move in with your partner, you must understand the legal aspects involved.
From understanding the difference between joint tenants and tenants in common, to the importance of a cohabitation agreement and making a will, here, we discuss the key legal issues that UK cohabiting couples should consider when buying a property together.
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The Difference Between Joint Tenants and Tenants in Common
Before purchasing a property, couples must decide whether they want to be joint tenants or tenants in common. This is a crucial decision as it determines what happens to the property if one partner dies or if the relationship ends.
Joint tenants own the property equally. If one partner dies, the property automatically goes to the surviving partner, regardless of what’s written in a will. This might be the preferred choice for couples who have been together for a long time and who have intermingled their finances.
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Tenants in common, on the other hand, can own different shares of the property. This is especially useful for couples who contribute different amounts to the purchase. If one partner dies, their share of the property does not automatically go to the surviving partner. Instead, it will be distributed according to their will or, if there is no will, according to the rules of intestacy.
The Importance of a Cohabitation Agreement
Unlike married couples or those in a civil partnership, cohabiting couples do not automatically have financial protection if the relationship breaks down. This is why having a cohabitation agreement is vital.
A cohabitation agreement is a legal document that outlines what would happen to the property, and other assets, if the relationship ends. It can detail who owns what, how property and debts will be divided, arrangements for children, and more.
Having such an agreement can offer peace of mind and financial security. It also reduces the potential for costly and stressful legal disputes should the relationship end. Regardless of the stage of your relationship or financial situation, legal advice should be sought when considering a cohabitation agreement.
The Necessity of Making a Will
When you’re in the throes of buying a property with your partner, making a will might be the last thing on your mind. However, it’s a critical step for cohabiting couples.
For joint tenants, if one partner dies, the property automatically goes to the surviving partner. But what about other assets, like money, possessions, or investments? Without a will, these wouldn’t necessarily go to your partner.
If you’re tenants in common and one partner dies, their share of the property and other assets will be distributed according to their will. If there is no will, it’ll be distributed according to the rules of intestacy—and a cohabiting partner is not recognized under these rules.
This is why it’s necessary to make a will. It ensures that your wishes are followed and that your partner is provided for in the event of your death.
The Consideration of Stamp Duty
Stamp Duty Land Tax (SDLT) is a tax paid by buyers when purchasing a property in the UK. The amount of SDLT you pay depends on the property price and your circumstances.
For instance, if either of you owns a property already, the purchase may be considered an additional property, attracting a higher rate of SDLT. This could significantly increase the cost of buying a home together.
It’s essential to consider this from the outset and factor it into your budget. Consult with a property lawyer or tax advisor for tailored advice.
The Need for Legal Advice
When purchasing a property together, it’s essential to seek independent legal advice. This will ensure that you understand your rights and responsibilities, the implications of being joint tenants or tenants in common, and the necessity of a cohabitation agreement and a will.
Purchasing a property is likely to be one of the most significant financial decisions you’ll make. So, invest in professional advice. It will help you navigate the process, avoid potential legal pitfalls, and provide you with the peace of mind you need to enjoy your new home.
Remember, the law doesn’t automatically protect cohabiting couples in the same way it does for married couples or those in a civil partnership. Understanding and addressing these legal considerations is key to protecting your financial future and achieving your shared property goals.
The Role of a Declaration of Trust
A declaration of trust, also referred to as a trust deed, is an essential legal document that can provide peace of mind and clarity for unmarried couples buying property together. This document is a record of who owns what in the property. It specifies the proportion of beneficial interest each person has, meaning how much of the property’s value they own.
Having a declaration of trust is particularly beneficial if you’re tenants in common, as it can detail each person’s share of the property. For instance, if one partner contributes a larger amount to the initial deposit, this can be reflected in the percentage of the property they own. The declaration of trust can also stipulate how the proceeds from a potential property sale would be divided.
Remember, family law for cohabiting couples can be complex and full of legal jargon. Therefore, it’s advised that you seek legal advice before drafting a declaration of trust. A family law specialist can ensure that the agreement is legally binding and that it accurately reflects your financial input and interest in the property.
The Implication of Property Ownership and Mortgages
Understanding the property ownership structure and mortgage implications is essential for cohabiting couples buying property together. This consideration is critical to protect your financial interests and to avoid unexpected disputes or complications in the future.
There are two types of property ownership in the UK: freehold and leasehold. Freehold means that you own the property and the land it stands on outright, forever. Leasehold means that you own the property, typically a flat, for a set number of years but not the land it stands on.
When buying a property with a mortgage, remember you are both responsible for repayments, irrespective of how you share the property. If one person stops paying, the other person is still responsible for the entire mortgage payment. This may seem like an unlikely scenario, but it’s crucial to consider all possibilities when buying property together.
Conclusion
Cohabitation and property ownership involve a considerable amount of financial and emotional commitment. Therefore, it’s crucial to take the process seriously and consider all possible scenarios. From understanding the implications of being joint tenants or tenants in common, to the need for a cohabitation agreement and a will, living together as a couple brings multiple legal considerations.
Being aware of your legal rights, as well as the potential issues that can arise, can help alleviate potential worries and disagreements down the line. Investing in legal advice can provide clarity, guidance and the confidence you need to make informed decisions about your shared property.
Remember, the law doesn’t automatically protect cohabiting couples in the same way it does for married couples or those in a civil partnership. Therefore, addressing these legal considerations from the outset is vital in protecting your financial future and achieving your shared property goals.
In the grand scheme of things, taking the time to discern these legal aspects, like the beneficial interest, declaration of trust, and the implication of property ownership can provide assurance and peace of mind as you embark on this significant life milestone with your partner.
