When purchasing property with another person it is necessary to nominate how the property is to be held. This is a very important step in the process and great care needs to be taken. There are two ways the property can be held: as Joint Tenants or Tenants in Common.
The property is held equally by both owners. Upon the death of one owner, their interest ceases and the surviving joint tenant becomes the sole owner not withstanding any provision concerning the property in the will of the deceased.
Tenants in Common:
The property can be held by numerous parties in any proportion (e.g. 20/80, 70/30 etc). Upon the death of one owner, their share will pass in accordance with the terms of their will (or the laws of intestacy where there is no will).
Which is appropriate?
A Joint Tenancy will not be suitable if one owner wishes to be able to pass their interest on in their will to someone who is not the other owner. It is most often used by married couples. It would also be unusual to hold property as a Joint Tenant if the joint owners were not related. If it was and one were to die, their family would not receive their interest. The surviving Joint Tenant would become the sole owner of the entire property.
Enduring Power of Attorney
When purchasing (or selling) property whether with another person or on your own, it is worthwhile ensuring that you have an Enduring Power of Attorney in place. This will allow the property to still be managed and dealt with in circumstances where you have lost capacity due to illness or injury. If the person you are buying the property with is your spouse, you may wish to appoint them as your Attorney.
If the other owner is someone other than your spouse, in order to create an element of checks and balances, you should consider appointing one or more people, who are not your co-owner, and who must act together, when they act as your Attorney. Your Attorney or Attorneys will then act in your interests, in conjunction with the co-owner when the property needs to be dealt with.
You should also consider putting in place a formal agreement between the owners detailing what you both want to happen if the property was to be sold, in case the relationship later breaks down.
In the event where there is no formal agreement, court involvement is more likely, particularly where one co-owner has contributed more than the other, financially or otherwise, to the property. In most circumstances, it is best to avoid situations where contributions are not equal, as it may be very difficult to recover the extra proportions contributed when the property is sold.
DBL Solicitors can assist you with all property matters, from buying and selling the property, drafting and preparing formal agreements between the co-owners regarding the property and preparing Wills and Enduring Powers of Attorney.
Please contact us for further information specific to your property purchase.