Buying a property with someone else? Here's what you need to know

The way you structure your ownership can have significant consequences and lasting implications, particularly if circumstances change down the line. That's why it's essential to approach it with careful planning to ensure your investment - and your relationship - are protected.

Below, we explore the key legal considerations to help you navigate this important decision with confidence.

1. How will you own the property?

When purchasing a property with someone else, you will need to decide how you will legally hold the property. There are two main options:

Joint Tenants: This means you both own the property equally, regardless of how much each person contributes to the purchase price. If one of you passes away, the property automatically passes to the surviving owner under the "right of survivorship." This is popular option for couples who want equal ownership and simplicity in inheritance.
Tenants in Common: This allows you to own the property in unequal shares, which can reflect your individual contributions. (eg a 70/30 split). If one of you passes away, their share does not automatically go to the other owner but forms part of their estate. This option is often chosen by those who wish to protect their individual investments or have children from previous relationships.

2. Contribution to the Purchase Price

If you are contributing unequal amounts towards the deposit, mortgage payments, or other costs, it’s important to record this formally. A Declaration of Trust can set out the exact shares each person owns and how the proceeds will be divided if the property is sold. This can help to avoid misunderstandings or disputes later and provides clarity for both parties.

3. Should you consider a Cohabitation Agreement?

If you are not married or in a civil partnership, you may want to consider a cohabitation agreement. This is a legal document that outlines how financial matters, including property ownership, will be handled during your relationship and in the event of a separation. It can cover areas such as:

Who is responsible for paying the mortgage, bills, and maintenance costs.
What happens if one partner wishes to sell their share.
How the property will be divided if you separate.

A cohabitation agreement provides peace of mind and reduces the risk of misunderstandings or disputes.

4. Joint mortgage - What it means

When buying with a partner, you are likely to apply for a joint mortgage. You should bear in mind that:

You'll both be jointly and severally liable for the mortgage. This means if one person cannot pay, the other is responsible for covering the full amount.
Your credit histories will be linked, so one partner’s poor credit could affect the mortgage application.

Having open and frank discussions about affordability and financial commitments early on can help avoid any surprises later.

5. Don't forget your will

If you choose to own the property as tenants in common, or if you are not married, it’s crucial to make a will. Without a will, your share of the property may not automatically pass to your partner, which could create complications.

A will ensures your wishes are respected and provides clarity for your loved ones.

6. Be aware of tax implications

There may be tax implications when buying together, particularly if one of you already owns another property. For example:

Stamp Duty Land Tax (SDLT): If one partner is a first-time buyer and the other is not, the first-time buyer relief may not apply.
Capital Gains Tax (CGT): If the property is sold and one partner owns other properties, CGT may be payable on their share of the gain.
Inheritance Tax (IHT): You should take advice to overall estate planning.

It’s a good idea to seek advice on how tax rules may apply to your situation.

In summary

Buying a property with a partner, family member or friend is a significant financial and legal commitment. By understanding the options for ownership, recording contributions formally, and considering agreements such as cohabitation agreements or wills, you can protect both your interests and your relationship.