Would you buy a house with a complete stranger? In a recent survey by HSBC 59% of 18-40 year olds said that they were at least ‘open to the idea’ with 4% saying that they would be prepared to move in with someone that they had just met in the pub!
With the over 50s holding 75% of Britain’s housing wealth, home ownership has more than halved among middle income 25 to 34 year olds since the nineties as house prices have increased faster than wages. It is difficult for couples to get on the housing ladder but for single people it is often near impossible. Tackling this problem in an innovative way HSBC recently held the UK’s first ever ‘speed dating’ event for co-buyers. The prospective property partners met in a London bar and discussed not only life styles and hobbies, but also more practical issues such as available deposit and credit ratings to see if they were a ‘match’. This interesting, if unorthodox way of becoming a home owner is however not without potential pitfalls.
Any persons buying together whether strangers or not – need to carefully consider the issue of co-ownership. Most unmarried couples choose to own the property as what are known as ‘tenants in common’, this means that if either party dies the deceased’s share does not automatically pass to the survivor as it would do if they held the property as ‘joint tenants’.
A tenants in common arrangement also has the benefit of the co-owners being able to agree the shares in which they own the property, usually based upon the proportions in which each owner contributes to the initial deposit and ongoing contributions.
What co-owners often fail to consider in the excitement of becoming home owners is the possibility of their circumstances changing. What happens if one party loses their job (co-owners are jointly liable for mortgage payments and other outgoings) or wants to sell and the other doesn’t?
Such problems can be avoided by co-purchasers entering into a formal agreement, known as a declaration of trust, recording what they have agreed will happen if their situations change.
When purchasing a property jointly with another, it is vital to understand the full implications and details from a legal perspective before entering into the agreement. For further information please get in touch with our Residential Property team.
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