Buying a property with a friend

In recent years, more people have been buying a property with a friend. This trend contrasts with the traditional approach where most joint mortgage applications come from couples buying a home. When buying a property with someone else, it’s crucial to choose the right co-ownership structure. In the UK, the two main options are joint tenancy and tenancy in common. Each has its own pros and cons that you need to consider.

What is joint tenancy?

Joint tenancy is the most common option for buyers purchasing a home with someone else, such as a partner or friend. All buyers own the property equally, regardless of how much each contributes to mortgage payments, bills, or maintenance. If one owner passes away, the property automatically transfers to the surviving owner. When the surviving partner passes away, they can leave the property to anyone they choose.

What is tenancy in common?

Tenancy in common allows each buyer to own a specific share of the property. This can be an equal split or divided differently. Shares can be adjusted if circumstances change, such as one owner contributing more financially due to a new job. An owner’s share can be passed to a different beneficiary rather than the co-owner upon death.

You can change a joint tenancy to a tenancy in common and vice versa.

Pros and cons

Benefits of joint tenancy

• Combined salaries: Greater borrowing power.
• Sharedownership: Less financial burden on each owner.
• Security: Right of survivorship ensures the property passes to the surviving owner.

Considerations for joint tenancy

• Equal Shares: Individual financial contributions aren’t recognized if the relationship breaks down.
• Sale Agreement: Both owners must agree to sell the property in case of a relationship breakdown.

Benefits of tenancy in common

• Individual shares: Ownership reflects each person’s financial contribution.
• Deed of trust: Outlines each owner’s financial interest, reducing risk in case of a relationship breakdown.
• Separate beneficiaries: Each owner’s share can be given to a different beneficiary upon death.

Considerations for tenancy in common

• Deed of trust: Drafting this document incurs additional costs.
• Wills: Each owner must draft a will to ensure their share goes to the intended beneficiary.
• Always seek independent legal advice when considering these options.

Choosing the right ownership structure

Discuss the pros and cons with your co-buyer to choose the best ownership structure. For more information, speak to a TSPC solicitor estate agent for expert advice.