Buying a House with Friends - Is it a Good Idea?
As of November 2019, the average asking price for a residential property in the UK is £302,808, according to Rightmove’s house price index. While this is down from £306,712 in October, it still represents a colossal investment, especially for first time buyers desperately endeavouring to save a 10% deposit. At first glance, buying with friends may be a good solution to this issue.
Figures from the Office for National Statistics (ONS) suggest that full-time workers can expect to spend nearly eight times their earnings when purchasing a property (and this does not include the interest you will ultimately repay). It is for this reason that many would-be homeowners are looking for alternatives to the traditional ownership model, including guarantor mortgages, and government backed help to buy schemes. Another increasingly popular option is purchasing a house with a friend.
Purchasing a home with a friend will enable you both to get a foothold on the housing ladder, while reducing the amount of money you require for a deposit, stamp duty, and household bills including council tax, utilities, and insurances.
In the following article, we will address many of the questions that arise when home buyers consider joint ownership with a friend, and the issues to be aware of before doing so.
Buying with Friends- Tenants in common
Where property is purchased by two or more individuals, it may be held either as ‘tenants in common’ or ‘joint tenants’. A joint tenant arrangement means that each person has a full stake in the property and if one owner dies, their share passes to the surviving co-owner (this is referred to as survivorship). This is the most common ownership model adopted by married couples, or those in a civil partnership, but they are also used by couples with children from a previous marriage, for whom they wish to provide in their Will.
Those buying a house with friends will most likely choose to be tenants in common, as this confers a distinct beneficial share in the property for each owner. It is important that from the outset, the split of shares should be clearly defined – this may be 50/50 or 25/75, or any other apportionment. As with joint tenants, tenants in common have to agree before the property can be sold. However, each tenant in common can, at their own discretion, leave their share of the property to whom they wish in their Will – as such, there is no right of survivorship.
Disputes Arising From Tenancy in Common (Buying with Friends)
Legal disputes arising from a tenancy in common arrangements are not uncommon but can be avoided by ensuring that the conveyancing process is undertaken thoroughly from the outset. For example, it may be recommended to draft a ‘declaration of trust’, which will ensure that the precise financial interests of co-owners are recorded in a legal binding document when buying a house with friends. This will avoid any potential for disagreement later regarding the division of ownership.
Disputes which may arise with tenants in common include:
- Where one owner wishes to sell the property, but the other does not
- Disagreements over maintenance and changes to the property – i.e. the work to be undertaken and who will pay
- If one party fails to pay their side of any financial obligations (e.g. council tax or mortgage)
- If the relationship between the owners deteriorates
- Disputes arising from the provision of one party’s share of the property in a Will or decision to sell
- If one party brings new people into the household without permission (whether temporary or permanent)
- Disagreements regarding pets
At the outset of the purchase, it will not be possible to protect against all such potential disputes, but it is possible to mitigate many of these. It is vital that, where possible, agreements are put in writing in the sale and purchase agreement. Another key consideration when buying a house with friends is preventing the property from being sold by the surviving owner in the event the other dies. In anticipation of such action, from the outset, a restriction can be placed on the Land Registry’s ‘proprietorship register’ of the registered title, stopping the sole survivor from selling the property. This is important as, without such a restriction, a buyer may not be alerted to the fact the seller is, in fact, a joint tenant, and not in the position to sell with their sole permission.
So Buying a House with Friends (Tenants in Common) - Is it a Good Idea?
Co-ownership with a friend presents an ideal opportunity to establish yourself as a homeowner. This may be a step towards sole ownership in the future, or it may provide a suitable permanent arrangement. As with any aspect of law, the devil is in the detail. Purchasing with a friend or a partner as a tenant in common may make excellent financial and legal sense for some, but not for others. If this is your chosen route to home ownership, leave no stone unturned. Do seek expert legal guidance from a conveyancing Solicitor who will take the time to listen to the details of your situation and put in place the protections necessary; doing so will allow you relax and enjoy your new abode in the knowledge that should anything not go to plan in the future, everything has been considered. The peace of mind this will bring will prove invaluable.
Guillaumes LLP Solicitors is a personal and professional, full-service law firm in Weybridge, Surrey. We have a highly experienced family law solicitors and property lawyers team who can assist you with all matters relating to property law. If you're considering buying with friends, you'll also need an excellent conveyancing solicitor to help you. To make an appointment, please call us on 01932 840 111 or contact us today.