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Joint Ownership: A Definitive Guide

Buying a home with your partner or friends is a fantastic way to afford a bigger home. Co-buying also makes it easier to raise a more substantial deposit and pay less for a mortgage in the process. 

Please see below to learn all that you need to know about Joint Ownership.

 

What is Joint Ownership?  

Joint ownership is a way for friends, family and partners to pool their funds to buy and own a property together. 

While joint ownership bears a resemblance to the Shared Ownership scheme, there are a few unique differences between the two forms of property ownership, such as who owns the remaining share(s) of the property as well as the share amount each co-owner has.

Unlike Shared Ownership – which is a deal between the buyer and a housing association, joint ownerships can consist of up to four co-owners and are usually agreements between friends and family members.

 

Advantages of Joint Ownership

One of the most apparent advantages of joint ownership is the ability to reduce the initial costs associated with buying a home by sharing the required fees and deposit with another buyer.

Under joint ownership, all co-owners of the property will share the responsibility for paying the associated conveyancing & legal fees, as well as contributing to the deposit amount. 

Providing that you don’t spend far beyond your collective means, you’ll be able to secure a larger, more expensive home through joint ownership than you would have otherwise been able to do so by yourself.

Another advantage of joint ownership is the reduction in the monthly amount of mortgage repayments. 

As you will be sharing repayment responsibilities with up to four other joint owners, you can all split the costs of repayments, allowing you to have more money to spend on the things you love.

 

Disadvantages of Joint Ownership

As with many things in life, there are both positives and negatives about joint ownership. 

While it may seem advantageous to reduce the amount of money you will spend on a property, the most important thing to remember is that with joint ownership, the property is never solely yours. As such, joint ownerships can test even the strongest of relationships, so it’s essential to ensure that you are compatible with the person(s) you choose to co-own with.

In most cases, jointly owned properties amongst friends are bought to privately rent or sell at a later date. However, there are no regulations that prevent you from living in a jointly owned home yourself, as this is at the discretion of your fellow co-owners. 

As mentioned above, one of the most significant disadvantages to joint ownership is the fact that all joint owners must agree on everything you do with the property. 

From a legal perspective, each joint owner must act as a collective, rather than an individual, meaning that any attempt to remortgage a joint ownership home or take out a high-value loan with the property as collateral, must be agreed to by all co-owners of the property. 

It is also important to remember that as co-owners, you are all jointly responsible for the mortgage and any other loan repayments that affect the property. As such, should one of your co-owners enter financial difficulty and be unable to maintain their portion of the mortgage repayments, yourself and any other co-owners will be responsible for covering their share.

Due to the collective financial responsibility of joint ownership, it is generally advised that you and your fellow co-owners each have a legal representative and a deed of trust to legislate for a breakdown in communication with one another or a legal dispute.

 

Types of Joint Ownership

As mentioned above, joint ownership comes in two forms, either as ‘joint tenants’ or ‘tenants in common’. 

Suppose you have decided that joint ownership is the best (or more affordable) way to secure your dream property. In that case, it’s essential to learn the differences between joint tenancy and a tenancy in common. 

Please note that in Scotland joint tenancy is referred to as ‘Joint ownership’. In contrast, a tenancy in common is known as ‘common property’, the basic principles of both forms of joint ownership (outlined below) apply across the UK. 

 

What is Joint Tenancy?

Joint tenancy is a type of joint ownership whereby each person owns the entire 100% stake of the property, giving each owner equal right to make decisions regarding the property. 

As a joint tenant, you all must act as one single voice; this includes the taking out of a mortgage, as well as the selling or letting of the property. 

Unless you and your desired joint tenant(s) can afford to buy the property outright, you must take out a joint mortgage to cover the value of the property. 

Unlike a traditional mortgage which will only focus on the credit-worthiness of the buyer, the credit rating of all parties will be subject to scrutiny, and should one of the joint tenants get into financial difficulties or be refused a mortgage; you will all be affected.

Unfortunately, unlike buying a house by yourself, as a joint tenant, you are unable to leave the property to someone else in your will, should you die. 

Known as the ‘right of survivorship’, upon death, your 100%’ share’ of the property will automatically pass to any surviving owners, as opposed to a specified person in your will. 

Survivorship is unique to joint tenancies and is applicable in all but the rarest circumstances, such as those where all joint tenants have died at the same time or there are no surviving joint tenants to absorb your share. 

While friends may occasionally own a property as joint tenants, married couples are often the most common types of joint tenancy owners due to the right of survivorship, 

 

Tenancy in Common

Tenancy in common is another form of joint ownership that refers to each person owning a different share of the property. However, unlike a joint tenancy, shares don’t have to be of equal size, and the property can be passed onto friends and family.

Due to there being no right of survivorship, tenancies in common are often the preferred method of joint ownership when purchasing a home with friends or unmarried family members.

As with joint tenancy, if you are part of a tenancy in common, you must all agree on important matters such as the leasing or sale of the property. 

However, despite the restrictions, tenants in common have greater flexibility than joint tenants to force through a deal in the event of a disagreement. Tenants in common also retain the ability to buy the shares of their fellow owners.

 

Which is Right for Me?

Ideally buying a home by yourself without the financial help of others is the most recommended method. Still, depending on your circumstances or the value of the property, this might not be a viable option.

Should you decide to go down the route of joint ownership, it’s essential to consider your particular circumstances before making your decision.

 

If you would like to own 100% of the property’s value but lack the financial capacity to own the property by yourself, then a joint tenancy is the solution for you. 

However, you should also take into consideration the fact that under a joint tenancy you would essentially forfeit the ability to pass on the property to your loved ones if you were to die before your fellow co-owners.

A tenancy in common therefore may seem like the better option if you wish to pass your property onto your next of kin. 

However, despite the advantage of being able to choose who inherits the property, it’s crucial to keep in mind that the person who inherits the home may have different intentions for the property than yourself or the other joint owners. This situation can be especially problematic when there is no declaration of trust in place.

 

What is a Declaration of Trust?

Also known as a ‘deed of trust’, the declaration of trust is legal documentation that outlines specific details on how much money each joint owner has paid into the property, as well as what should happen in the event of a dispute.

A deed of trust can significantly help prevent expensive and bitter legal disputes over the ownership and sale of the property (especially amongst future generations) and can also serve as a legal safeguard should one joint owner be unable to continue to pay their share of the mortgage. 

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