Shared ownership with a friend?

redpin_2

how would you get it down on paper i.e. i want to invest £150k, but a friend wants to invest only £50k, creating a 75-25 split

G_M

Use a solicitor. Make it water-tight.

Consider every possible future scenario and talk through/agree what would happen - then include it in the agreement.

a) one of you wants to sell, the other can't afford to buy out.......#
b) one of you wants to move a partner in......
c) one of you loses job, can't afford mortgage....
d) you both decide to sell, how do you split the equity? What if running costs/mortgage payments/maintenance have not been shared equally as well as the initial equity unequal.....
e) New roof needed/advisable? One of you can't afford and /or just doesn't want to spend the money......

etc etc.

There are regular threads here about shares that go wrong/sour. Be aware it's a bigger commitment in some ways than mariage! However, provided you have clear and legally watertight agreement from the start it can work.

shop-to-drop

Would you both live there? If so then think whether the friend has to pay some rent to you. Or maybe if you have a spare room then rent it out and the rent is yours only.

geoffky

OH DEAR! do you know what you are letting yourself in for...i suggest a lot of research.... and some more.

redpin_2

thank you for the speedy, and useful advice. we were planning to maybe not go down the mortgage route, i'm planning to save £150k (i'm about 1/3 of the way there) alot of hard graff& the friend i speak of has about £50k put away which he inheritted. this isnt something i'll be doing tomorrow, but maybe 5 years time, but its good to know if its possible/worth doing, specially in terms of securing and making sure the money i have is safe. the "friend" would be sharing/living in the flat too. i take on the point which i diddnt think much off though, if im paying the lion share of the money then i'm effectively losing money.

zzzLazyDaisy

redpin wrote: »

how would you get it down on paper i.e. i want to invest £150k, but a friend wants to invest only £50k, creating a 75-25 split

What you need to do is to buy the property as 'tenants in common' in unequal shares (75/25). The solicitor will explain this to you when the time comes, but in essence it means that you each own the shares that you have contributed, and if the house is sold, you will each get back that share (or contribute that loss if the value falls).

But it is more complicated - suppose repairs need doing? Say the boiler breaks or the roof leaks? Will you pay half each on the basis that you both will get equal benefit, or will you pay 75% of the cost of the repair as you own 75% of the house?

What about utility bills? Council tax? The stamp duty and solicitors fees for buying the house? 50/50 or 75/25?

What if one of you wants to move/loses their job/gets married?

What if one dies and leaves their share of the house to someone else?

You need to work out between you both want the arrangements to be, and get this drawn up in a written agreement.

Edit - the advice above assumes that you are in England or Wales - Scotland may be different. Also if the 'friend' is in fact a partner/spouse/mother of your children, then the advice may change again....

hazyjo

Also do you have similar tastes in decor, etc? Would you be choosing furniture/paint colours together? Things like this can cause real niggles. It's hard enough with a spouse!

Definitely do some searches on here. Not something I'd ever consider. If your friend has inherited that money and has no savings, how can you be sure they'll afford the costs of owning a house? Are they planning to save too in the meantime, or use just that money? As mentioned above, what happens if say the boiler needs replacing and you have savings and he has zilch?

You say in around 5 years' time. I bet both your circumstances will change a hell of a lot before that time. Not even something I'd be thinking about now.

Also, don't forget the 'negative equity' scenario. A nightmare when it comes to selling a shared property, especially if you put more in. You could well come out with the bigger loss.

Jx