Buying a property with your partner is a big step. While there are lots of things to think about when buying a property, you should also be aware that living with a partner or ‘cohabitant’ (the legal term) has legal consequences. Your cohabitant, in the event of a separation, has a right, in certain limited circumstances, to make a financial claim against you. They can also make a claim if you die without a will.
The law in this area is complex and the outcomes are not guaranteed. Here are my 4 top tips when buying a property with a partner.
It is not uncommon for one party to have more money to put down as a deposit at the outset than the other, due to savings or inheritance, for example. If you are making unequal initial contributions towards the purchase price of a property and buying the house in joint names you might think that you would each get back the money that you put in when the house sells. That is not the case. The division of the funds follows the title. This will be to your detriment if you pay in more than your cohabitant at the outset and the title is taken in joint names.
Alternatively, some properties are bought in one person’s sole name even although both cohabitants are contributing to the purchase price, perhaps because one is not able to get a mortgage in their name. On sale, in terms of property law, the owner is entitled to all of the sale proceeds. Whilst there are potential remedies as a cohabitant to make a claim under the Family Law (Scotland) Act 2006 in both of these scenarios the outcome is not guaranteed and the process is expensive.
The situation is even more challenging if you were to die without a will having paid in more money at the outset. On sale your estate would only get half of the net free proceeds as, again, the division of the funds follows the title. Unlike at separation, there is no option to raise court proceedings seeking credit for your initial contribution. The situation is even worse if you have invested funds but title is taken in your partner’s name. Your estate gets nothing and you have no court remedy available.
There is thankfully as easy solution to these issues, namely having a written agreement in place that regulates all of that. Having an agreement in place protects your initial deposit contribution and creates certainty about what should happen to the funds following separation or death.
- Ongoing Contributions
If your cohabitant is not on the title but contributes to the mortgage they might be able to argue that the reduction in the mortgage is a financial advantage that you have enjoyed and raise a court action seeking a financial award from you following separation. Whilst you could argue that their contributions were effectively rental payments you are embroiled in expensive and uncertain litigation where the outcome is not guaranteed.
It is far better to have certainty and making an agreement at the outset prevents difficulties and unexpected outcomes in the future.
If you and your cohabitant were to separate what would you want to happen to the property? The only option available to cohabitants, without agreement, is for the property to be sold as there is no right in law for cohabitants to have a property transferred at separation. Spouses can seek a transfer but not cohabitants. If one of you would like to have the property transferred into their name that can only be achieved by agreement. Again, it is better to have that in an agreement at the outset to have certainty for the future, in case of future acrimony between you.
Separate from any property issue, you can prevent a claim by a cohabitant upon your death by making sure you have a will in place. It may be that you would want your cohabitant to be able to claim on your estate but you should still make a will to make sure your wishes are followed. If you die without a will, your cohabitant has an entitlement to claim on your estate and their claim may outrank your children. They are entitled to claim as much as a spouse would be entitled to in the same circumstances and that could leave nothing (or very little) for your children. Ensure certainty on death and make a will.
Remember, nothing is a problem until it is a problem. It is always easier to sort things out at the beginning, before a dispute arises, rather than later, especially if emotions are running high as a result of your separation. It may be a difficult conversation but it is worth having at the outset to avoid large costs and unpredictable outcomes in the future.
If you would like any advice about cohabitants’ rights, then please contact a member of the Blackadders Family Law team, who would be happy to assist you.
Blair Duncan, Solicitor
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