Posted on 26th June 2017

Protecting your Investment when Buying Property with a Partner

Martin Williamson, Director & Head of Residential Property
Martin Williamson, Director & Head of Residential Property

According to the Office of National Statistics, the fastest growing family type in the UK is the cohabiting couple. Now more than ever, couples are deciding to live together before they get married, if they choose to get married at all. This can, however, lead to legal implications if the couple splits up.

A married couple has certain legal rights that protect them should the marriage come to an end, and this is particularly important when considering property. Property purchases tend to be the largest asset that a couple owns, and regardless of how much each party paid into the house, they can look at claiming a share. This could be down to how much they paid towards the deposit, mortgage contributions, money they paid towards decorating or even an inability to pay due to giving up work for childcare purposes. This can be argued in court and even a person who has not contributed financially could be entitled to a share of the property in the event of a divorce.

Unmarried couples don’t have the same legal protection, and one party could find themselves out of pocket in the event that they split up. Many unmarried couples are in the younger demographic and have had to go to the Bank of Mum and Dad to get enough money for a deposit. This can lead to the situation where one partner puts down more capital than the other. In the event of a split, the legal rules are very unclear – for example, if one person pays the whole deposit but puts the mortgage in joint names, they could find that the proceeds of any sale are split down the middle, even if one party did not contribute at all. Alternatively, if the house is put in one party’s name, the second party could find that they’re not entitled to any money from the property, even if they were solely responsible for paying the mortgage.

Cohabiting couples can seek independent legal advice to avoid finding themselves left short in the event they split up. One option is signing a Deed of Trust before they purchase a property together, which can ensure that if for example, one party paid in £10,000 for a deposit, they will be entitled to get that back from the sale of the house. While this sounds unromantic for a couple about to take the next big step in their relationship, it can be an essential document in protecting individual contributions. This would be particularly valuable for someone who borrowed the money from family for their deposit, as it would guarantee they could repay the debt following the sale of the house.

Another option is a Cohabitation Agreement, which is a more detailed document that goes into the particulars of a couple’s financial situations including bank accounts, liabilities, children and belongings, and ensures each party is treated fairly post-separation. Although this is a more expensive option, it gives more extensive protection of assets if the couple split up.

While no couple wants to consider the possibility their relationship won’t last forever, there is a lot of value in making sure you are protected should a breakup happen. Taking a practical step to give you peace of mind may not be as romantic as a Valentine card, but you could find that one day, it’s a lot more important.

Please note: This article is intended as guidance only. No responsibility for loss occasioned/costs arising as a result of any act/failure to act on the basis of this article can be accepted by Latimer Hinks. In addition, no responsibility for loss occasioned/costs arising as a result of any act/failure to act on the basis of this article can be accepted by the firm.

For further information contact Latimer Hinks on 01325 341500