Property Shared Ownership Factsheet
This factsheet is designed to inform and assist individuals who wish to co-own (fractional ownership) a house or flat with one or more other people, so that the arrangement operates legally, fairly and smoothly.
It is very common for people to own property jointly. Most married couples will co-own their property, as will many unmarried couples.
It is also becoming more and more common for people to purchase a property with a friend or relative in order to be able to afford to own a house or flat rather than to rent. The owners might not be able to afford to purchase a property alone at all, or they may prefer to buy a larger property with a relative or friend than the size that they could buy alone.
Although joint purchase allows many people to become home owners who otherwise would be unable to do so, such a relationship with a friend or relative should be entered into cautiously. The co-owners will be sharing financial burdens together and important decisions must be made, so it is important that people who intend to buy together have a full and frank discussion in advance about their budget, income and expectations.
This factsheet explains the situation where two or more people co-own a property either for them all to live in together, or as a holiday home.
Methods of Joint Ownership:
There are two methods of jointly owning a property - joint tenancy and tenancy in common.
This method of shared ownership is most appropriate for married couples, as the two joint owners own the whole of the property together for the benefit of both of them, rather than each owning specific shares in the property for their own benefit. If one of the owners dies then the other one will automatically become the sole owner of the property, and there is no possibility for the will of the co-owner who has dies to leave a ‘share’ in the property to anyone else, such as a child.
Tenancy in Common
This method of shared ownership is more common for unmarried couples or anyone who would want to be able to bequeath their share in the property to another person were they to die rather than the whole of the property belonging to the surviving owner. The co-owners own specific shares in the property which can reflect the amount of the deposit and mortgage contributions to be paid by each owner, and can be in any percentage share.
Shared Ownership and the Law:
Sharing is a concept that has been widely recognised in law for centuries. Through the legal mechanism of joint tenancy and tenancy in common people may jointly own both moveable assets and land.
It is crucial that co-owners sign a document called a Deed of Trust. This records the percentage shares that each owner will hold in the property, and it also establishes the method and procedure for selling the property, dealing with the possibility of one owner wanting to sell but the other not.
In addition to the formal Deed of Trust, it is advisable to have a written agreement to regulate the finances and management of the shared ownership household. There is nothing in law to prevent an informal arrangement being agreed verbally regarding these matters, but the issues of paying the mortgage and bills are so important that it is very advisable. Difficulties with a verbal agreement arise when one party wants to prove the contents of the agreement and the others disagree about what was said. It is strongly recommended that a written agreement is entered into to cover the issues of:
- Dividing the expenses of owning a property (mortgage, bills, repairs)
- House rules regarding the use of the property and dividing the jobs and tasks that need to be done
Up to four co-owners can be named as owners of the property on the deeds. This is likely to be more than enough in most situations, as people usually only buy a property with one or perhaps two others. However, if you want to buy a property with more than four owners it is possible, but it is necessary to speak to a solicitor as a legal mechanism known as a trust has to be set up so that the four legal owners hold the property ‘on trust’ for themselves and any other owners, known as beneficial or equitable owners.