When an unmarried couple buys a property together, they must establish a legal basis for their proportional interest in that property, particularly if they have contributed unequal amounts towards the deposit or will be paying unequal shares of the mortgage and bills.
Where both names will appear on the title deeds of the property, it is of the utmost importance that mutual clarity exists as to what would happen to the property and their shares in it should the couple separate or wish to end the agreement in the future.
What are the options?
A mortgage advisor will usually ask whether the couple intend to reside in the property as tenants in common or as joint tenants. Joint tenants usually own equal shares in the property while tenants in common may own different shares. In both circumstances, both owners are equally entitled to live in the property.
If the owners decide to live as tenants in common, it is wise to engage the services of a solicitor such as Parachute Law to establish a deed of trust. This formally clarifies the proportional interest of each person and their rights and responsibilities and also specifies how proceeds from any future sale would be shared between them.
What if only one name is on the title deeds?
If two people intend to live together in a property but only one person will contribute to the deposit and be named on the title deeds, a deed of trust is less appropriate. Instead, the couple should consider putting a legally drafted cohabitation agreement in place.
A cohabitation agreement specifies the rights and responsibilities of both parties and can protect the named owner against a potential Trusts of Land and Appointment of Trustees Act 1996 claim being made by the other person.
In conclusion, unmarried couples buying a property together must enter into such an agreement wise to potential risks and take all necessary actions to protect their investment. A deed of trust or cohabitation agreement sets out the legal precedent and can safeguard against future disputes.
