buying a house with friends

Buying a house with friends - Frequently Asked Questions

This week, we joined in with a Law Society Twitter discussion about buying a house with friends. If you weren’t able to join in #SolicitorChat, here are our answers to the questions.

1. How many people can become owners of a single property? What rights do they have?

Up to four people. They have the rights granted in the title, which are equal rights. They also have the right to jointly sell or mortgage the property.

2. What is the difference between tenants in common and joint tenants?

Joint tenants: each person jointly owns the whole property. In the event of sale, the sale proceeds would be split equally between the owners. If any of the owners were to die, their share of the property would automatically pass to the remaining owners by “right of survivorship”.

Tenants in Common: each owner has a defined share of the property (which may be unequal for example, 70%/30%). In the event of sale, the proceeds would be split in accordance with each owner’s defined share. If one of the owners dies, their share would pass in accordance with their will. Alternatively, in the absence of a will, under the rules of intestacy. Making a will when you hold as tenants in common is vital.

3. What are the main pitfalls friends buying property together face and how can a solicitor help to avoid them?

Relationships may deteriorate or someone’s circumstances may change. One owner may decide they want to sell the property and the other owners may not want to. A solicitor can advise how the property should be held to protect each owner’s share.

4. Who is responsible if one of the owners stops paying their share of the mortgage?

Under a joint mortgage, the owners will be “jointly and severally liable”. This means that if one stops paying, the other owners would still remain responsible for paying the mortgage.

5.  What happens if one of the owners decides they would like to sell?

You must all agree to sell. Ideally, a declaration of trust signed at the outset should set out what will happen if one party wants to sell. Options could include one person buying the other’s share. If agreement can’t be reached, you will need a court order to sell the property.

6. What top tips would you give to someone considering buying property with their friends?

Consider the risks involved carefully and take legal advice. Ensure you have a plan in case things don’t work out. If you’re putting different deposit amounts into the property (or are tenants in common) ensure your interest is protected by a declaration of trust.

If you are considering buying a house with friends or family members, our conveyancing team can help. Call us today on 0800 988 7756 or request a free instant quote

equity loan

Help to Buy equity loan scheme: A helping hand onto the property ladder

Are you thinking of getting a foot on the property ladder or wanting to ‘upgrade’ your present home? If so, the Government’s Help to Buy equity loan scheme may be just what you need to help achieve your dream home. Unfortunately, however, the Government has stated that intends to stop the scheme in the coming years.

What is the Help to Buy Scheme?

The scheme, first launched in its present form in April 2013, has so far helped over 183,000 people to get on, or up the housing ladder.

The scheme is a government loan towards the price of your property. This is often known as an “equity loan”. Equity loans are open to both first time buyers and existing property owners in properties within England. The maximum purchase price is £600,000 and the property being purchased must be a new build property.

How does it work?

With an equity loan, you will only need a 5% deposit. The Government will also give you a loan of up to 20% of the purchase price. This means that you would only need a mortgage for 75% of the purchase price of the property.

For example:

If the property costs £200,000.00 (100%), the deposit would be £10,000.00 (5%), the government loan would be £40,000.00 (20%) and the mortgage £150,000.00 (75%).

The equity loan is interest free for the first five years. If you pay it back after the first five years, then the interest rate applicable will depend on the prevailing interest rates at that time.

You can pay back part of your loan at any time with no additional fees. The minimum percentage you can pay back at any time is 10% of the current market value of your home.

When will it end?

Despite the success of the Help to Buy Scheme the 2018 Budget advised that the Help to Buy equity loan scheme will come to an end in 2023.

First time buyers in England will be able to obtain loans from Help to Buy until March 2023. However, from April 2021 the Scheme will no longer be available to purchasers who already own a property.

The budget advised “the government does not intend to introduce a further Help to Buy Scheme after March 2023”.

It is therefore important that if you feel you would benefit from the Help to Buy Scheme to purchase a new home or to move home that you act soon before the Scheme ends.

That being said, this week’s general election may affect this. We will keep you posted of any changes.

How to apply

Your financial adviser will be able to advise you as to whether you would qualify for the scheme. You can also apply/check direct on your local Help to Buy Agent website.

The scheme is not limited to people with low incomes and is open to everyone to apply.

Why new build?

If purchased through an approved Help to Buy builder the property is backed by an approved new build guarantee scheme such as NHBC, LABC, Premier Guarantee and Zurich etc. During the first two years the property is therefore covered for failure by the builder to meet the warranty providers requirements. During the following seven years the property is covered for any structural damage that may occur under the warranty.

Our conveyancing team are experts at dealing with both Help to Buy equity loans and New Build transactions. Call us today on 0800 988 7756 or request a no obligation instant quote.

joint property ownership

Joint property ownership

Joint tenants v tenants in common

When you buy a property with another person or people, you can either buy as ‘joint tenants’ or ‘tenants in common’. It is important to consider both options to decide which is the most suitable for your circumstances. Clients often ask us the difference between the types of joint property ownership within conveyancing transactions. Let’s take a look:

What does joint tenants mean?

  • As joint tenants, owners will jointly hold 100% of the property.
  • In the event of the sale of the property, the sale proceeds would be distributed in equal shares.
  • If one of the owners dies, that owner’s legal share would pass automatically to the surviving person’s ownership. This is known as “right of survivorship”.
  • The property will automatically pass and does not form part of the deceased person’s will.
  • You cannot alter joint tenant ownership by making a will. If a will made by a joint tenant attempts to leave the property to someone other than the surviving owner, that section of the will would be ineffective.
  • This type of ownership is usually the most popular with married couples.

What does tenants in common mean?

  • As beneficial tenants in common, owners each own a portion of the property.
  • The shares can be equal e.g. 50%/50%, or unequal e.g. 70%/30%.
  • In the event of sale, the sale proceeds will be split as per the percentages stated.
  • If one one of the owners dies, the deceased’s share of the property would pass in accordance with their will. If there is no will in place, under the Intestacy Rules instead.
  • It is important when holding a property as beneficial tenants in common that you have a will in place which accurately represents your wishes.
  • Who does this type of ownership suit? Couples who are contributing unequal amounts to the property; friends or family members.

Do I need a declaration of trust?

  • For parties contributing unequal shares, you can protect your interest by instructing a solicitor to draw up a declaration of trust. This is to ensure that the sale proceeds are split in accordance with the level of contributions made to the equity in the property.
  • The declaration of trust is a legally binding document and therefore the terms must be honoured.
  • Further, your solicitor can register the declaration of trust as a restriction on the title of the property.
  • In the event of sale of the property, the solicitor acting would obtain a copy of the declaration of trust to ascertain how the monies are to be distributed.
  • A declaration of trust can be useful if one purchaser’s parents are gifting the deposit to a couple purchasing a property. They can ensure that, in the event of a split, the parents would receive their contribution back prior to the sale proceeds being split.
  • Owners who will be paying unequally to the mortgage find declarations of trust useful also. This can then be reflected in the event of sale.

For further advice with regards to joint property ownership, declarations of trust or wills, our specialists can help. Contact our residential conveyancing and / or wills team today on 0800 988 7756 for a FREE initial discussion.

help to buy

Help to buy ISAs - there's still time!

First Time Buyers have been able to save money towards their first home in a Help to Buy ISA since the Scheme began on 1 December 2015. The scheme provides a 25% bonus on savings; with the minimum bonus being £400 and the maximum being £3,000 depending on the balance saved in the ISA.

From 30 November 2019, you will no longer be able to open a Help to Buy ISA. Therefore it is important if you feel you will benefit from the ISA scheme to act now. Even if you are not currently thinking of purchasing a property, it may be beneficial for you to have an ISA open for future use to maximise your deposit towards a new property when you are ready to move.

For First Time Buyers who already have a Help to Buy ISA open there is no need to worry. You will still be able to save in the ISA up until 30 November 2029, and claim the bonus by 1 December 2029.

Am I eligible to open an ISA?

The criteria to open a Help to Buy ISA are that you must:

  • be aged 16 or over;
  • have a valid National Insurance number;
  • be a UK resident; and
  • have never owned a property anywhere in the world.

Which bank can I open my ISA with?

There are a wide range of banks offering the Help to Buy ISA scheme. You do not need to use your usual bank.

How does it work?

  • In order to open the ISA you will need to deposit the minimum initial payment of £1.00. However, you can input a maximum amount of £1,200 upon opening the ISA.
  • You can then input a maximum of £200 a month into the account.
  • The Government will then give a 25% bonus on savings between £1,600 to £12,000.
  • The minimum government bonus is £400. This means that you need to save £1,600 to receive the minimum bonus.
  • The maximum balance you can receive the bonus on is £12,000, meaning you could potentially receive a £3,000 bonus towards your new property.
  • When you are in a position to complete on the purchase of your new property, you will need to close the ISA at the bank. They will then provide you with a closing statement showing the balance you have saved.
  • You will need to give this to your conveyancing solicitor who will be able to apply for the bonus. The bonus will be deducted from the deposit money due for the property.
  • To qualify for the bonus, the property being purchased must have a value no higher than £250,000.00, or £450,000.00 in London.
  • If you do decide not to purchase a property you are able to withdraw the monies from the ISA back into your current account with no charge.

Our conveyancing team are experts at dealing with Help to Buy ISAs. Call us today on 0800 988 7756.