Property buyers play it safe with no-nups
3rd August 2014
Savvy property owners who club together to buy a home are turning to "no-nups" to safeguard their investment.
Whether as a cohabiting couple, or two or more friends clubbing together, a cohabitation agreement, or "no-nup", as they now becoming known, can help fix the outcome if things go wrong.
And that is particularly important when contributions to buying a property are unequal. Nowadays, many young people are buying with the help of parents, and there is often a difference in the amount invested by each person, so it is important to agree what share each owner has, at the outset.
But many joint buyers who are not married or in a civil partnership still do not realise that they have little or no protection if things go wrong, believing that they will have similar rights to divorcing couples when it comes to sharing assets or maintenance.
Although property can be held in specified shares, so each gets back their relative contribution if there is a sale, it does not protect against the other financial contributions that may have been made, and that's where the no-nup comes in.
This sort of agreement can set out the way property is owned and the contributions being made, including how finances will be managed in the relationship, down to who pays what and on what date. It can also cover responsibilities for day to day running and managing of the property, right through to what will happen in the event of a split. As well as being a legally binding official agreement that takes away uncertainty, it can help relieve tension about financial matters from the outset, as drawing up the agreement means everything has to be agreed from the start.
Anyone buying property together should be protecting themselves by getting under the surface to agree the basis on which it is being undertaken. Division of assets and property when splitting up can still be affected by other circumstances, for example if children have been born between a couple, but it is a good strong basis to work from.
It is best to address the formal agreement before committing big sums of money to a purchase, but the no-nup can be drawn up at any time to record what was intended although it is too late when you're at the point of splitting and the relationship has broken down.
The agreement can drill down to the detail of who takes out the bins, or simply be a declaration of trust, which would set out who owns what share and the agreement on responsibilities towards the mortgage and other property outgoings and any parent giving or lending money to help their children onto the property ladder should insist on this as a bare minimum.
Whether it is a romantic relationship or friends clubbing together, too often, people worry about undermining the relationship or affecting their friendship if they try to deal with the nitty gritty in this way, but it is likely to be too late if attempts are made to deal with this when things begin to break down. As market prices continue to rise, we expect to see more and more people clubbing together to get their foot on the housing ladder, and it is going to be increasingly important to have everything properly documented, if you want to avoid the chance of ending up in the courts at a later day, fighting your share.
If you have any questions on property ownership, please speak to our Head of Property, Mike Beadsworth or anyone else on the property team, by calling 01491572138.
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This is not legal advice; it is intended to provide information of general interest about current legal issues.