Mortgage advisors and estate agents report seeing an increasing number of instances where individual first time buyers are linking with a friend to get on the property ladder. Difficulties in raising a 25% deposit or satisfying the borrowing criteria of the mortgage lenders is increasingly bringing friends together to pool their resources and borrowing abilities to get on the property ladder. But how is their relationship regulated? What happens if they fall out or one of them wants to sell? It’s important to consider these issues at the time of the purchase and they can be embodied in a legal and binding document in the hope of avoiding problems in the future.
Simone Robinson a senior property solicitor at LCF Residential says “It is simple to put in place the appropriate binding agreement or “Declaration of Trust” which will set out in what proportion the friends have contributed to the purchase and what each is to receive upon a subsequent sale whether it would be a refund of their initial investment and an equal share of any surplus profit or loss or whether they are to share the property in different proportions based upon their initial capital contributions towards the deposit”
An agreement can regulate how the outgoings of the property, including mortgage payments are to be made and how a decision by one or both to sell is to be put into effect.
“The agreement can regulate the terms of ownership and mutual and respective responsibilities” adds Simone.
There are of course many people who will not have considered such agreements at the time of their purchase and are now considering how best to get out of an arrangement that has not worked out as planned.
The law provides that where one of two joint owners requires to terminate the relationship or realise their share in the property, the other part is obliged either to agree to the sale or alternatively reach a mutual agreement with the other as to the purchase of their interest.
If the joint owner who wants to leave meets with lack of cooperation an application can be made to the County Court for an order for sale and directions as to how that sale can and will be effected including the appointments of appropriate valuers to determine the price at which the property will be offered on the market and to conduct the sale. “Court proceedings should if possible be avoided and be a last resort as they will be a drain on savings” cautions Simone.
“Where one party or both have decided that the arrangement has not proved successful it is obviously in the interests of both to be realistic as to their expected outcomes in the current market and to limit the need to resort to incurring legal costs.”
Simone Robinson is a Conveyancing Solicitor in at Last Cawthra Feather’s Ilkley Office. Simone has over 10 years experience in dealing with the complexities of conveyancing law. Call 08456 800 277 or email enquiries@lcf.co.uk
LCF Residential is part of Last Cawthra Feather LLP (LCF) a leading and an award winning law firm. The firm has offices throughout Yorkshire. It now has 12 partners and 115 employees. Visit www.lcf.co.uk for more information.
