The various challenges that arise from a break-up can easily extend to property ownership if you haven’t taken steps to protect your share.
Whether you’re separating from a partner, or just want to ensure your property ownership will be protected, make sure that you’re well-informed.
Separation is never easy. And when money or property comes into the equation, it can create even more friction between two people.
But making sure that you know your rights when it comes to your share of a property is crucial and will help you to easily establish who owns what.
Is your property owned by one or both of you?
The legal ownership of your home will be important in defining the share you should get after a break-up or separation.
It might be owned by just one of you, meaning it’s in one of your names, or it might be owned jointly by both of you.
If you don’t know how your property is owned, it’s worth finding out.
If your home is in England or Wales, you can check with the Land Registry for a fee of £3; if it’s owned as tenants-in-common, it will be labelled with ‘Form A restriction’.
If your home is in Northern Ireland, you can find it by searching one of the three Land and Property Registries.
In Scotland, you can find out by doing a property search on the Register of Scotland website.
What are my rights if my partner owns the property?
If the property is owned by your ex-partner, and your name isn’t on the title deeds, then you do not have an automatic legal right to continue living there.
Since they legally own the property, they are able to evict you without a court order, rent or sell the property without your agreement and take out a loan against the property without your consent.
Conversely, if you own the property outright, it is you who wields all of these rights
What are my rights if I own half of the property?
As part of a joint tenancy agreement, you and your ex-partner own the entire property rather than a quantified share.
This is the most common option that couples choose when they buy a property and is often considered to be simpler than other joint tenancy agreements. However, its rigidity can be a cause for disagreement.
If the property is sold, then the proceeds are split 50-50, but if one person chooses to remain in the property, they must buy out the 50 per cent share of the other.
If no resolution is found between partners, then the matter can go to court.
In this instance, one of the partners may end up disputing the 50-50 ownership split, since they will feel they contributed more to the property than their partner.
The court may decide on a new percentage split of ownership or order the sale of the property.
Tenants in Common
Another joint tenancy option for couples is to register as tenants in common.
This can help bring more transparency and flexibility to property ownership from the outset, whereby the couple can agree on what portion of the property each of them owns.
With the help of a solicitor, this split can be agreed upon from the outset, and can also be altered over time to reflect the ongoing contributions that have been made throughout the ownership of the property.
So, although one person may contribute more to the initial property purchase, if the other were to begin earning more money and increase their share ownership through increased contributions, the agreement can be amended accordingly.
Financial support from a family member
It’s worth looking at the best way for a family member to gift you money for a property.
According to Onefamily, over 50s lent a total of £8.2 billion to relatives to support them between March 2020 and May 2021.
With a large portion of this being put towards the property, it’s important to ensure that money is protected. Gifting money can be undertaken in numerous forms.
1) Gifts without reservation
Any gifts given to first-time buyers must be made without any reservation or liability to be repaid.
If it’s not made clear that the money is a gift, then mortgage lenders will see it instead as debt, and this could consequently damage the mortgage prospects of a buyer.
If it is put in writing to the recipient that the money is a gift, then it will not be considered a loan.
2) Inheritance tax
While £3,000 can be given away each year tax-free, money for a property is likely to far exceed this figure.
If you have enough equity in your home, then you can borrow money to gift it to a family member.
It’s also important to remember that any money you give over £3,000 might be liable to inheritance tax if you pass away in the following seven years.
To combat this, you can take out life insurance cover for those seven years to cover the tax bill. This is known as a ‘gift inter vivos’ policy.
Protecting your family financial support
If you are receiving a financial gift towards a property purchase from a family member, you’ll no doubt want to protect it.
One option is to undertake a prenuptial agreement with your partner, which will help to ringfence the money and protect it from any claim in the event of a divorce.
Although prenuptial agreements aren’t legally binding contracts, they will almost always be upheld if certain criteria are met.
Alternatively, some first-time buyer loans will let family members put cash in a separate savings account in their own name.
This will allow a higher loan-to-value mortgage to be taken, and ultimately will keep the money in the hands of the family member.
A tenants-in-common agreement is a great way of protecting what is yours and your family’s.
In protecting your share, the contributions of your family members will be considered within the agreement — something that wouldn’t necessarily happen in a joint tenancy agreement.
In challenging times, it helps to have expert support on your side. Find your perfect financial adviser with Unbiased today.