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Joint ownership

Joint ownership, also known as co-ownership or shared ownership refers to a way of owning property which involves multiple owners. There is no limit to the number of people who may appear on the title deeds of a property, however, when applying for a joint mortgage, banks and building societies will normally only take up to four incomes into consideration when making a mortgage offer.

This could mean that you are buying with a friend, a relative or even some one that you don’t know. Joint ownership or co-buying is different from part ownership schemes, where a property is sold as leasehold on shared ownership terms (usually between 25% and 75%).

Who would co-buying appeal to and why?

The problem faced by first time buyers, of getting a foot on the property ladder, has become the increasing focus of national discussion.

Over recent years the average house price has risen far faster than the average wage, making it increasingly difficult for those wanting to invest in their first property. In addition to this, a greater proportion of young people are looking to buy a property alone, as opposed to the traditional option of with a long term partner, making it even more difficult to obtain a mortgage on a single wage.

Joint Ownership has become a popular way to combat this problem, and is now so popular that banks and building societies are recognising it in their mortgage provision schemes, with many providers offering joint mortgages tailored to meet the buying needs of groups often comprising several people.

Advantages and disadvantages of buying with a friend

In addition to the normal risks and benefits of property investment and home ownership:

Pros –

  1. The initial costs of buying a property will be shared. This not only includes the deposit, but also professional fees such as solicitors fees, stamp duty and chartered surveyors fees.
  2. The mortgage repayments will be lower for each participant if shared between two or more owners.
  3. The financial responsibility of the property will be shared. For example, any unexpected costs will be shared amongst the owners, e.g. if a radiator leaks/boiler breaks/roof falls in.
  4. It could allow you to buy in an area that would otherwise out of your financial reach. Alternatively, it may give you the option of a shorter mortgage term meaning you pay less interest overall.

Cons –

  1. You are reliant on other people – if one person defaults on the mortgage repayment, your provider will see it as the responsibility of every named owner. This could not only have implications for your current investment, but also affect your credit rating for the future.
  2. You are likely to incur additional legal costs as you draw up a contract between you and your co-buyers. This legal protection is essential to anybody entering into this type of contract.
  3. You will also need to have discussed what will happen should one of the owners circumstances change. For example, it is possible that one owner may wish to sell before the other/s. Alternatively, if one of you were to lose your job and be unable to pay your share of the mortgage repayments, or if one of you were to die.
  4. Many people like to express their personality through the decoration of a property – with joint ownership communal spaces must be agreed on.

Considerations when buying with a friend

  1. Discuss every eventuality in detail – what will happen if one of you wants to sell and the other doesn’t, what would happen if one of you died, what would happen if you had a falling out.
  2. Draw up a contract – this could also be known as a trust deed, a declaration of trust or a co-habitation agreement.
  3. Be clear and honest about what you want – you may discover in the early buying stages that although you and your buying buddy are in similar financial situations and want to live together, you want different types of homes. For example, one of you may want to renovate an older property, whilst the other one wants to move into a brand new place.
  4. If you have never lived together before, perhaps you should consider renting a place together first as a trial.

How is joint ownership legally defined?

Joint ownership usually falls into one of the two categories below:

Joint Tenants:

The preferred legal relationship of married couples, civil partners or people in long term relationships who are buying a property together. As joint tenants, both owners have an equal share of the entire property. If one partner should die, the property automatically falls to the other owner, regardless of any contradictory will statements.

Tenants in common:

Popular amongst friends/relatives buying together. Under this agreement each party owns a specific share of the property. This share need not necessarily be equal, and in the event of the death of one owner, the ownership would not automatically fall to the second owner.

In both cases, anyone named on the title deeds is equally responsible for the mortgage repayments reaching the mortgage lender, regardless of the share of the property owned.

Please note that it is recommended that in all cases of joint ownership a separate contract is drawn up between the owners, outlining the share of ownership and the responsibilities of each party involved. This is often known as the trust deed or declaration of trust.