Partner buying into house

mjb84

Hello, I am looking for any advice one can give me.

The scenario is familiar with other posts regarding a partner buying into a house, although I can't quite answer my question.

My girlfriend and I will be buying our first house and we are in the fortunate position of being cash buyers but in unequal shares (85%-15%). My girlfriend would like to buy into my share of the house over time. Is this legally possible and what are the potential pitfalls of such an arrangement. Is it even worthwhile?

As of now, we are in the process of buying as 'joint tenants' with a declaration of trust of home ownership in the respective shares. such that if things weren't to work out between us we would be entitled to that percentage of the value of the house.

any thoughts and advice greatly appreciated!

InMyDreams

Do you mean 'tenants in common' with a 15/85 split?

Why does she want to do this? I would have thought it would be easier to just stick with the 15/85 split, especially as there's no mortgage to complicate things. Although I guess if you want to be petty, she should be paying you a little bit of 'rent' to cover the fact that you own more of the property. That wouldn't effect the percentages that you each own though.

If over time you get married or start a family and one of you gives up work or your circumstances change in some other way, then you can deal with it then, depending on your circumstances at that point. But until that point, I'd just stick with the 15/85 (assuming you don't mind effectively subsidising her).

I don't think there's an easy way to gradually adjust the percentages month by month if that was what you were implying. And in any case, what would be the point? - It would be simpler if she just invested any excess cash into some other, separate, investment vehicle. Then in the case of a split, she'd have her 15% plus her other, separate investment.

It might be old-fashioned, but I do think that at some point you have to decide whether or not you are 'all in' (whether or not that involves a marriage certificate) at which point it doesn't matter who put in what / who gives up work to look after children / who has an accident or illness that requires the other's care / who brings in any future money / who pays for what / .... At that point, change the ownership to joint tenants.

ValHaller

InMyDreams wrote: »

Do you mean 'tenants in common' with a 15/85 split?

No, I don't think so at all. I do believe that OP means

'joint tenants' with a declaration of trust of home ownership in the respective shares (15/85)

AFAICS this is an alternative approach which leaves more flexibility in changing shares by update of the trust deed rather than adjusting tenants in Common shares directly.

InMyDreams

Ah, OK. It was my understanding that 'joint tenants' did not own specific shares each... in effect they both own 100%. I assumed that if you wanted to specify an unequal split, you had to be tenants in common.

ValHaller

InMyDreams wrote: »

Ah, OK. It was my understanding that 'joint tenants' did not own specific shares each... in effect they both own 100%. I assumed that if you wanted to specify an unequal split, you had to be tenants in common.

Normally you would go TiC and your understanding of JT and TiC is correct. Effectively, the trust deed is a side deal

mjb84

Thank you for your comments.

i am confused now though with regards to 'Joint tenancy' which I think this is the route we will go down with a declaration of trust on the side confirming what % we both owned. what is AFAICS?

So i was wondering if there would be a way to change the shares of the house month by month or annually as you say. Is this completely pointless and more complicated than its worth? Would the legality of this be expensive too?

As you say it probably is more effective for her to put money into another investment month on month.

Hudson1984

can you not just get a 35% mortgage? she can then pay that off and you can pay your 50% share in cash?

so basically you would pay 50% she would pay her 15% and mortgage the remaining 35% both own equal parts then just you've paid yours off cash whereas she's having to get a mortgage

Land_Registry

mjb84 wrote: »

Thank you for your comments.

i am confused now though with regards to 'Joint tenancy' which I think this is the route we will go down with a declaration of trust on the side confirming what % we both owned. what is AFAICS?

So i was wondering if there would be a way to change the shares of the house month by month or annually as you say. Is this completely pointless and more complicated than its worth? Would the legality of this be expensive too?

As you say it probably is more effective for her to put money into another investment month on month.

Our online Public Guide 18 explains the two different types of ownership, namely tenants in common and beneficial joint tenants and how they are recorded on the land register.

When owners register themselves as tenants in common there will often be a trust deed or some other evidence to demonstrate their intentions. The land register though will simply record the fact that they are tenants in common but no mention is made of the deed or specific shares involved - the guide explains this.

Trust deeds and any other deed can be changed as many times as you wish but no action is required as far as the registered title is concerned. The only time you would apply to change the land register would be if you changed from tenants in common to beneficial joint tenants.

Changing the trust deed every month will incur a cost as presumably you would use a solicitor to do it. Whether you need to do this or whether you could draw up a trust deed which contained a schedule of the agreed changes and how they would occur over time is something you would need to take legal advice on. At the same time other options could be discussed.

Note - AFAICS is probably As Far As I Can See

Guest101

I would not take payments gradually and continuously. Just as an example: She pays £500 a month, but the property goes up £50 a month in value.

Your total profit therefore per month is £42.5 and her's £7.5.

But let's say your house is worth 100k, so You own £85K and she does 15k.

So she's buying 0.5% per month in month one, but 0.499999% in month 2 and so forth, but you are still giving her 0.5%. So she's making abit extra every month.

Now I wouldn't be bothered personally, I bought our house 100%, but split it 50/50 as 'i'm all in' with kids etc.

But since it will take her 70 months to pay off that amount and things dont work out, you will have lost out abit, as the house will now be worth an extra £3500.

I agree with the previous post about being 'all in', it's that or get her to get the 35% mortgage as suggested.

InMyDreams

mjb84 wrote: »

i am confused now though with regards to 'Joint tenancy' which I think this is the route we will go down with a declaration of trust on the side confirming what % we both owned.

So am I! I thought one of the points of a joint tenancy was that you couldn't determine percentages. The other being that if one of you dies, the property is still owned 100% by the surviving partner so doesn't make up part of the deceased estate. This can make sorting out the estate simpler (assuming that's what you wanted).

I was under the impression that if you wanted unequal shares (or even equal shares, but wanted your share to go to someone else in the event of your death) then tenants-in-common was the way you did that.

Which means that joint tenancy is the most common form of ownership for married couples who want the surviving spouse to inherit *everything* (because it makes things simpler) and tenants-in-common was what most other people did.

What was your reason for wanting a joint tenancy rather than tenants-in-common?

zzzLazyDaisy

I would suggest that you buy as Tenants in Common with a Trust Deed making the 15/85 split clear, and don't look to complicate things by effectively looking to 'staircase' her share on a monthly or annual basis - apart from anything else the cost you in legal fees of keep updating the trust deed would outweigh any benefit. Also, how would you work out her share each time as house values fluctuate, and getting repeated valuations may also add to the cost.

Having said that, if she does want to buy into your share, an alternative may be for her to save in a separate investment fund and to review the situation in (say) five years. This gives you time to settle into coupledom, and gives her time to save up an amount that might make the re-evaluation of shares worth doing.

Also, do remember that as time passes, things may change. If you marry, and have children, while the actual shares in the property won't change, she may have a stronger right to live there with the children and in the event of a divorce, your share may still be taken into account in dividing the matrimonial assets.

On a separate but related point - do make sure that you both make wills. If you are not married and die without wills, the shares in the house would follow the intestacy rules which could leave the surviving partner both bereaved and homeless.