When you buy a property jointly with another party it is important at the outset to think about how you would want the equity in the property to be split between you.
Not only will this have an effect on how your ownership will need to be registered, but this can also avoid difficult conversations and costly litigation down the line.
If you do not want to own the equity in the property equally, or you wish to leave your equity to someone other than your co-owner on your death, then you must hold the property as tenants in common.
By holding the property as tenants in common you can each specify your share in the equity and on your death this will pass in accordance with the terms of your Will. It is therefore vital to also ensure that your Will is up to date. For more information on why it is so important to have an up to date Will please click here.
There may be various reasons why co-owners choose to separate their shares in the property.
This may be for the simple reason that one co-owner is putting in more money than the other to the purchase of the property and wants to ensure that they receive those funds back in the event of a sale.
Alternatively, one party may be paying more in terms of mortgage and bills as ongoing costs and may therefore wish to state that they own a greater share in the property than the other party.
The relationship between the co-owners will often dictate how the equity is divided, for example friends or business partners will likely want to specify their shares in the property so that they can ensure this is left to their own family members on their death.
In order to document these shares co-owners should enter into a declaration of trust.
A declaration of trust is a contract between co-owners which clearly sets out the parties intentions at the time of the purchase.
If a dispute ever arose in the future the Court would use the declaration of trust as the starting point and there would need to be strong evidence to show that the position outlined had since been varied.
If you would like to discuss putting in place a declaration of trust please contact Serena Ely on 01473 229870 or by email at Serena Ely who will be happy to assist.