When two people buy a property together, it is essential to agree how the property is to be owned, says Gary Gillespie, Senior Conveyancing Executive from local solicitors Wiseman Lee
Imagine you cohabit as an unmarried couple and the two of you buy a weekend cottage together. You each have your own properties and you are financially independent of each other.
Your partner funds the whole of the cash purchase of the cottage and the Land Registry ownership details do not record that it is a tenancy in common to confirm the property is owned by both of you in shares.
At the pre-exchange contract meeting between the two of you and your solicitor, you confirm that it is not an investment purchase and you will be joint tenants. What is not discussed with the solicitor is that the payment of the purchase price is being made solely by your partner.
So, what would be fair when, years later, the two of you separate and you cannot agree how the proceeds of sale are divided? Are you entitled to part of the money or does it all belong to your partner? After all, you have not contributed to the purchase price but you are joint owners and you might think it was intended that your partner had, by implication, gifted half of the purchase money to you.
If you cannot agree how the proceeds of sale are divided, it may be necessary for you to ask the court for an order of sale. These kinds of cases are unique on the facts applying to the couple concerned, but the general principle arising from a 2007 Supreme Court case called Stack v Dowden is that the person who pays receives the net proceeds of sale, or it is split according to your financial contributions.
In cases like these, the question is whether each of you intended that you would receive a beneficial interest in the property. The difficulty is that a beneficial interest is different from a legal interest, and what the court did in the Stack v Dowden case was to examine the party’s intentions by looking at all the circumstances to arrive at the decision.
Therefore, if you intend you should each receive a share of the sale proceeds, please ask your solicitor to draw up a Declaration of Trust, agreeing what each of you will receive when the property is sold. If nothing is mentioned about this you could become embroiled in a time-consuming and expensive court case, which will likely cause a great deal of worry.
It is essential that when two people buy a property together you agree beforehand how the property is to be owned between you and therefore how the proceeds are to be divided on sale.
Wiseman Lee is located at 9–13 Cambridge Park, Wanstead, E11 2PU. For more information, call 020 8215 1000
