Buying a property and how best to protect your share

Advice  |   22 April 2021

Written by
Louise Toye, Solicitor

Whether you are buying a property with your spouse or partner, or with another person, you need to consider how your interest in the property is evidenced and how best to protect your share.

If the property is sold in the future or the relationship with the person you bought the property with breaks down, you will need evidence to show an unequal split if you believe that you own a larger share.

Although the property deed may state your name on the title, you may need an additional document to show how the property is owned. For example, you may have put in more money and wish to record it so that if the property is sold, you receive a larger share of the sale proceeds.

Back to basics: How a property can be owned:

It is possible to own a property in three ways:

  1. In your sole name;
  2. Jointly with another person(s) as “joint tenants”; or
  3. Jointly with another person(s) as “tenants in common”.

If you own a property as Joint Tenants with another person, it means that you each own a half share of the property. Should one of you die, it does not matter what your Will says, the deceased owner’s half share will automatically become owned by the other joint owner named on the title deed of the property. If the property is a rental investment, this also means that each party receives half the rental income and will be taxed according to that share.

If you jointly own a property with another person as Tenants in Common, it allows you to own the property in equal or unequal shares. If it is to be owned in unequal shares, then a Declaration of Trust is needed to evidence the split. If there is no Declaration of Trust in place, then there is a presumption of a 50/50 split. When a Tenants in Common owner dies, their share of the property will pass in accordance with their will, not automatically to the other person named on the title deed. Therefore it is very important to ensure your will is up to date if you owned a property in this way. Again, if the property is a rental investment and you own 60% of it, it means that you will receive 60% of the income and will be taxed according to that share.

Declaration of Trusts and Cohabitation Agreements

If you have a property in your sole name and want to protect it from a claim against the other party or if you wish to own a property jointly with another but in unequal shares, then you need either a Declaration of Trust or a Cohabitation Agreement.

A Declaration of Trust sets out how the property will be owned and how the proceeds of sale should be divided if the property is sold in the future. A Declaration of Trust can be drafted so that is takes into account future contributions by each party over time e.g., paying for improvements on the property. Alternatively, it can state a fixed unequal percentage detailing the share that each party owns. If there is a change of circumstances then a Declaration of Trust should be reviewed and updated.

A Cohabitation Agreement can deal with all the financial arrangements including property, assets and income. It can also include what happens if one party is there is a change in circumstance.

What happens if you get married or enter into a civil partnership after you have bought a property?

Declarations of Trust and Cohabitation Agreements are not binding once you get married or enter into a civil partnership. On divorce there are particular sets of rules which automatically apply. The court has the power to order a share of a property owned by one party to another or give a joint property to just one party. This can happen even where there is a Declaration of Trust or Cohabitation Agreement.

If a property is to remain protected after a marriage or civil partnership then the parties must enter into a Pre-Nuptial Agreement. This can deal with all the financial arrangements including property, assets and income as well as covering any change in circumstance.

It is still possible to have an agreement after the marriage or civil partnership. This is called a Post-Nuptial Agreement.

Pre and Post-Nuptial Agreements are not strictly binding on divorce but are usually upheld by the court unless the effect of the agreement would be unfair. It is not possible in England and Wales to have a fully binding agreement before a marriage or civil partnership about what will happen on divorce but a Pre/Post-Nuptial Agreement is the closest thing.

Reasons for entering into a Cohabitation Agreement or Pre/Post Nuptial Agreement.

Living with someone for a certain period of time, getting married or entering into a civil partnership doesn’t mean you are automatically entitled to share a property or keep a property after you split up.

If there is no agreement in place setting out the parties’ intention as to ownership, it means sorting out disputes involving property can be expensive and take a long time. A good cohabitation agreement or pre/post-nuptial agreement can mean that areas of potential dispute on separation are reduced or eliminated. Many couples also find the process of making an agreement help to clarify and give them the chance to think about how living together is going to work financially. This hopefully means that arguments about money are less likely later on.

We can help advise you on what might happen in your situation and whether a cohabitation agreement or pre-/post-nuptial agreement might be a good idea.

We have a team of experienced family and private client solicitors who offer fixed fee appointments. You can choose whether you would like that appointment to take place via telephone, video conference or (restrictions permitting) face to face.

We have offices in London, Bromley, Sevenoaks and West Wickham. Please contact us on 0208 290 0440.

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