What should you consider when purchasing with a partner?
FELICITY HART >
Trainee SolicitorWed 22 January 2020
The hardest asset to decide upon in any family law case is always the family home and for good reason. When you purchase a home, you do so as a united partnership; it is one of the happiest times of your life and it is difficult to foresee anything going wrong. Unfortunately, the reality is that partnerships do break down for a variety of reasons and when you buy a house you should be thinking about how to protect your interest. It has also become more usual for unmarried couples to purchase properties together rather than married couples. This is of importance as married couples get different rights compared to unmarried couples.
Types of Ownership:
There are two types of ownership; joint tenants and tenants in common.
By default, properties are usually purchased as joint tenants, but you will be given the choice when you are purchasing the property. By purchasing as joint tenants you both own the whole of the property with neither party owning a distinctive share. This means if you were to separate you would be entitled to 50% each regardless of who financed the property.
If the property is owned as tenants in common you each own a distinct share. This can be as simple as a 50/50 split or this could be an unequal share i.e. 70/30 split. It allows you to protect that share if needs be, and also gives you the freedom to gift your share via a Will to your chosen beneficiaries, whereas if you hold your property as joint tenants your property will pass to the surviving owner by survivorship, not through inheritance.
It is important to be aware of the different mechanisms that can not only protect your interest but also money gifted to you for the purchase of property from third parties, two of which are detailed further below.
When you are married and you separate, Matrimonial Law guides the courts to divide your assets. The division depends on a variety of factors such as children, earning capacity and the length of the marriage.
Broadly speaking, when you enter a marriage you agree to share your assets and you own them equally. If you bought a family home, you would both be equally entitled to this regardless of whose name was on the proprietorship register or who makes the mortgage payments. This is also irrespective of who paid the deposit and whether any money was gifted from external sources such as family members. Therefore, it is important to think about this when you purchase a property together.
If you are unmarried there is no law particular to cohabiting couples and how their assets should be divided upon their separation. This is completely different to married couples or couples in a Civil Partnership.
If you were to purchase a property with your partner, it is important to consider how the property is to be owned.
Declaration of Trust:
A Declaration of Trust is a legal contract used to protect and illustrate interests in properties by confirming the true ownership of a property in the proportions contributed by each party regardless of the Land Registry Title Register.
A Restriction is also entered against the property indicating to anyone looking at the Land Registry Title Register that the registered owner is not alone in owning the property.
They would then be referred to the Declaration of Trust to confirm the true ownership position.
If you were to later separate from your Partner, the Declaration of Trust could also detail what would happen to the property and how much each person’s share would be.
Pre and Postnuptial Agreements:
These sorts of agreements usually get a very fixed reception which can take away from their true purpose and their abundant usefulness. If you were to Google Pre-Nuptial Agreements, you are usually met with thousands of articles about their enforcements and whether they are in fact legally valid.
These Agreements cannot be enforced as legally binding contracts as they cannot take away the parties’ ability to ask the Court to make a financial order nor the Court’s powers to issue an order. This means that the Courts have a discretion as to whether the terms of such agreements are followed. The Supreme Court has made the decision, following a series of cases, that these Agreements should be followed when making financial orders unless the agreement appears unfair. The Court wants to be sure that each party’s needs and those of their children are provided for in terms of housing and income.
The purpose of these agreements is to illustrate the financial settlement agreed upon between the parties, rather than leaving it to the Court’s discretion. It is particularly important when considering non-matrimonial assets which had been acquired before the parties had even met, or to protect money gifted from third parties.
Although it is difficult to consider what would happen if a marriage were to breakdown, recording your agreement before any animosity enters the relationship could save both of you thousands of pounds that would otherwise be spent on legal fees. If (and hopefully) the marriage never breaks down, then great – the agreement is not needed!
Pre-Nuptial Agreements are therefore used if one of you had assets prior to the marriage and wish to retain these should you divorce, or if you are entering into a second marriage and want to ensure that children from the first marriage will inherit your assets.
TAKE A LOOK AT