Claire Simmons, Partner
Buying a house has always been one of the major landmarks that married couples reached as part of their life together.
But with the most recent official figures showing that almost a quarter of co-habiting couples are now not actually married, there is an increasing need for partners who haven’t yet walked down the aisle and/or have no plans to do so to think about how their individual investments in what is likely to be the biggest purchase of their lives are properly managed and protected.
This is especially important if one party is making a larger contribution to the purchase that the other, or if, in these days of high property prices, The Bank of Mum and Dad has provided some of the capital required to one or both of the purchasers to enable them to buy their new home.
Unfortunately, we’ve been asked to help with a number of cases where a failure to complete all the required documentation in advance has led to financial and emotional complications further down the line.
But by proactively addressing this issue as part of the purchase process and getting the right kind of legal advice, these difficulties can be avoided.
If a couple gets married or enters a civil partnership, and then some time later splits up, the court will consider all their assets when deciding on the divorce settlement, including any property that they jointly own – but for unmarried couples, this is not necessarily the case.
When a property is owned jointly, the legal title to it cannot be severed, and if one partner passes away, the whole title automatically passes to the surviving partner, regardless of any outside contribution to the purchase price.
That investment would simply be lost to the family members that made it, which, depending on the position with the co-owners’ relationship at the time, may or may not be a problem to them.
In order to make sure everything is in order with the property co-ownership and to avoid potential future problems, a Declaration of Trust should be made, with the help of the appropriate legal advice, which details exactly what each of the co-owners have contributed to the purchase.
If there are any third parties benefitting from this declaration of trust, it would also now need to be registered with the Trust Registration Service, which was introduced as part of anti-money laundering legislation and requires that information is provided about a trust, its assets and all relevant parties such as trustees and its beneficiaries.
It should also be clarified whether any parental or family contribution has been made as a gift or a loan, as the former may have inheritance tax and estate management implications if the person providing the money passes away before seven years have elapsed since the date of the gift.
In a related matter, any parent who has made a contribution to a property purchase should be including information on what they want to happen to their investment after they die in their will, and should make sure to keep this document up to date to reflect any changes in their wishes.
Your lawyer should be made aware of how much each co-owner has invested in the purchase, and would also factor in the different contributions that each party makes to the property’s running costs, such as utility bills, mortgage payments and maintenance.
While thinking about what might happen if things go wrong is the last thing that couples buying a home together want to do, making sure that the potential implications of this happening have been properly considered as part of the purchase process could save a great deal of heartache later on.