Buying a house together: A cautionary tale
Posted by Mary Raymont on 2nd July 2012
Are you considering buying a house with your partner (boyfriend or girlfriend)? What have you decided about how the house is shared if you split up? Are you too romantic to think about such an unpleasant scenario?
Well the Judges in the UK Courts would prefer that we all face up to such difficult issues at the outset. A Judge of the Supreme Court said in 2011 in a well known case where a couple were unmarried and bought a house together:-
“This is a cautionary tale, which all unmarried couples who are contemplating the purchase of residential property as their home and all solicitors who advise them, should study”.
The case was a common scenario but it had to be resolved by the Highest Court in the land (Jones –v- Kernott 2011 UKSC 53 2012 1FLR45). A couple who had bought a house together as a family home and some years later split up. They however made the mistake that you will hopefully avoid. They made no provision as to what should happen to the house if they split up. It was actually decided the lady would receive 90% of the value and the gentleman 10%. In this article I outline how to avoid an unexpected shock.
There is no such thing as common law husband and wife in English law. A legally recognised marriage or civil partnership ceremony is the only way as a matter of English law : to “tie the knot”.
If you purchase a property you will need a solicitor to prepare the papers to buy it. This stage is crucial. Your solicitor should prepare all the paperwork which should deal with what is to happen if the property is then sold.
Your solicitor should advise you on how you want to own the property.
These are some important decisions:-
- Who paid the deposit? Should that money be refunded on sale?
- Who paid solicitors fees and stamp duty? Should that money be refunded on sale?
- Who is going to pay the mortgage? How will these payments be dealt with on sale if the other person is not making an equal contribution?
- What happens if one person puts in considerable funds to develop the property?
- Who is going to benefit from an increase in value?
- What will happen if there is a decrease in value?
These are just some of the issues that need to be considered and reflected in the paperwork. If this does not happen you will be left with trying to produce documentary evidence of monies paid. Even if such evidence is available it may also be necessary to prove what you discussed originally, what was intended, who said what and whether such discussions were witnessed. This can simply be one persons word against the other.
Without the correct paperwork it can be very hard to prove such events especially over a period of what can be many years.
If all else fails the Court provides a remedy of last resort in an Act called TOLATA (Trusts of Land and Appointment of Trustees Act 1996). Under that Act the Court can order a sale now or in the future. The Court can order a buy out for a certain amount of money. The financial costs of such legal proceedings can be considerable. The emotional cost, especially where there are children, are probably without measure.
Better to be safe than sorry and accept the Judge’s advice. Get the paperwork straight from the outset and everyone knows where they stand.