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You have Bought Your House – How Much of it do You Own?

Posted on Tuesday, 18th June 2013 by

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Many people (too many people in my view) pay for their  houses in different proportions.  One of them may have a divorce settlement or inheritance that came to them alone and use that as a deposit on the purchase of a property with a co-habitee.

Equally they may have already bought a house and used an inheritance or  settlement  to substantially reduce the mortgage on that property and thus increasing its equity.  Fundamentally the problem is that many people do not appreciate precisely what they are doing in financial terms when this occurs.

If, when you buy the property with this unbalanced deposit, you own it as “joint tenants” or if you already own it as joint tenants and one person alone substantially reduces the mortgage, then the immediate effect of that is to give half of the value of that inheritance or contribution to the other owning co-habitee.

While that relationship is happy this perhaps does not seem to be that much of a problem but it can come as an enormous shock to people to discover that if they separate the Law does not by any means automatically give them back their extra capital contribution.

In fact if the property is owned as joint tenants, then the equity in that property is assumed to be owned 50:50 and it can be a struggle and often expensive in terms of litigation to undo that.  It is so easy to do something about it at the start but many people seem reluctant to have that discussion with their boyfriend/girlfriend.  We would firmly advise that properties are held as tenants in common in specific shares, even if those shares are “half each” .

At least it is beyond doubt at that point.  Equally, if a property is owned as joint tenants then that can be changed when a substantial capital contribution is put in by one of them to ensure that that contribution is returned when the property is sold.   This, of course, does only become a difficulty if the couple separate.  It can still create problems on inheritances’ where, if one of them dies, the wider family of that person is then faced with the prospect of trying to mount a claim against the surviving co-habitee for return of “mum or dads money”.

The best answer is probably to have a Deed of Trust.  It is a relatively simple document that can be drafted up at the same time that the house is purchased, or indeed subsequently if necessary, and that should have the effect of removing a lot of property heartache and uncertainty.  After all, the last thing you need if you separate or if you are in the middle of a bereavement, is to face the prospect of litigation over the home in which you are living.

Faye Remnant is part of our Family Law team based in Loughborough; our Solicitors in Loughborough are experts in their fields and dedicated to quality client care. If you would like to find out more about our solicitors in Loughborough please contact us.

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