Home Sweet Home: Buying Property as Cohabiting Couples
#Legal aspects of purchasing a home together as an unmarried couple
It’s a significant step for you and your partner to make the exciting decision to buy a property and create a shared space where you can build your lives together. In previous articles, we discussed the property investment considerations for cohabiting couples. When considering the financial benefits of buying a property together, the legal aspects are essential to consider as well, especially where couples are cohabiting but are not married. What legal considerations should you keep in mind when purchasing a home as a cohabiting couple?
- Legal Ownership
Determine how the property will be legally held, either as joint tenants, or tenants in common. Joint tenancy means both partners own the property jointly, with no distinguishable share, while tenants-in-common have a defined share of the property. This share could be equal (50:50) or in unequal percentages. Joint tenants cannot pass their interest in the property through their Will, but tenants-in-common can.
- Mortgage Arrangements
How is the mortgage to be discharged monthly? Is each person paying an equal amount or is this to be paid in unequal shares? If the split is unequal, is this fair or appropriate? Should the person paying a larger portion of the outgoings be entitled to a larger portion of the equity in the property in compensation?
- Tax Implications
Getting specialist financial advice on the impact of buying a property and any tax considerations is important. Will you need to pay the higher rate of Stamp Duty? Will your estate be liable to Inheritance Tax when you die? Will any Capital Gains Tax be payable when you sell the property?
- Financial Contributions
Define clearly both partners’ contributions and how the expenses are to be shared. As set out above, where expenses are not shared equally, is it agreed that the person who is contributing more should be compensated in the percentage of property ownership? Entering into a Cohabitation Agreement can help reduce any conflict or dispute in the future.
- Exit Strategy
No one likes to think about the end, but it’s crucial. Consider what happens to the property if the relationship ends or, if one partner passes away. A legal document like a Will or a Cohabitation Agreement can provide clarity, and particularly where you are not married, ensure that each person’s interests are protected.
- Legal Protection
Unlike married couples, cohabiting unmarried couples do not enjoy the same legal rights. To protect your interest, consult with a solicitor who specialises in family law and consider if a Cohabitation Agreement is right for you.