What you need to know before you sign up to buying a property with friends
Buying a property with friends can make sound financial sense if you want to get onto the property ladder. But poor planning now could lead to problems in the future. These are our top tips for making it work.
How will you share the purchase costs?
Up to four people can be registered as the co-owners of a property, though it’s most common for two friends to buy together. Sit down and agree how you will share the purchase costs; will it be 50:50 or will the split be uneven? And remember that it’s not just the price of the property – you’ll need to factor in other costs such as a survey and conveyancing fees too. It’s also important to discuss what would happen if either party wants to sell before the other is ready. Taking the time to talk about these matters first can minimise the chance of any disagreements in future.
Tenants in common or joint tenants?
Charlotte Surplice, Conveyancing Team Manager at PM Property Lawyers, explains. “Friends buying together normally buy as tenants in common. This means that each party owns a share of the property, but it doesn’t have to be an equal share. So if one of you is paying a higher percentage of the deposit than the other or is taking on more of the mortgage, you can apportion ownership accordingly.
“The other option is joint tenants, which is more suitable for couples. If one of the joint tenants dies, the property automatically passes to the other owner. This makes it less suitable for friends buying together as you can’t leave your share of the property to any other beneficiary in your will. So if the property was owned 60/40 and the owner of the 60% share were to die, the owner of the 40% share would inherit the entire property.”
Sign a Deed of Trust
A Deed of Trust sets out the legal ownership of your property. It’s particularly important if you are paying unequal amounts into the purchase. The Deed of Trust clarifies each owner’s investment so when you sell, you each get back the proportion you put in.
As well as the initial investment, the Deed of Trust can include things such as how much each party contributes to mortgage payments or investments by third parties (e.g. family members) who want to protect their contribution.
The Deed of Trust should also be clear about what happens if one of you wants to sell before the other.
Your property layer will be able to help you with a Deed of Trust.
Get expert advice
As with any mortgage, what’s right for you will depend on your specific circumstances. Each lender has their own particular criteria and a good mortgage advisor will explain all your options.
Make sure your property lawyer knows that you are buying with friends so they can be certain that you have all the necessary legal documents.
If you have any questions about buying a property with friends, we’ll be happy to help. Contact PM Property Lawyers on 0114 249 6926 or email firstname.lastname@example.org.
Find more tips and videos in our conveyancing resources.