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Joint Ownership means clubbing together to share the deposit, mortgage payments and bills. It can be a way onto the property ladder which may mean leapfrogging the first rung or enabling you to live in your favoured area.

· Introduction
· What's good about joint ownership?
· What are the downsides of joint ownership?
· How much can I borrow?
· The two types of joint ownership
· Drawing up a trust deed, or declaration of trust, and a co-habitation agreement
· Example of a declaration of trust
· Example of a co-habitation agreement
· Joint mortgages and how the finances could work when you buy with others
· Tips for those using joint ownership introduction services
· Frequently asked questions about joint ownership
· Mortgages with friends and families

Introduction

Joint ownership is increasingly being seen as a way onto the property ladder. It brings the first rung within reach, because it lowers the amount of deposit required by each investor and ongoing monthly costs. Because many people are used to sharing accommodation as students, trainees or renters for example, the idea of living in jointly owned property is the logical next step.

Whoever you are thinking of investing with, you should put measures in place to protect your investment. It is not recommend that you proceed with joint ownership without drawing up a trust deed or declaration of trust and a co-habitation agreement between all the parties. This may seem daunting at first but your solicitor will help you turn your agreements into working legal documents. Similarly, a mortgage adviser will help you understand how a joint mortgage works and the advantages, or disadvantages, of different types of mortgages. This guide is meant to give you, in plain English, the points you need to consider when drawing up the agreements with your property partner/s and your solicitor.

What’s good about joint ownership?
· You share the deposit between you, so you don't have to save so much to start with.
· You share the monthly mortgage payments.
· You share the initial costs of buying a property (solicitor's fees, etc).
· You are investing in your future, rather than paying rent.
· When you sell, if the property price has increased, you will have capital to put down on a place of your own.
· You get onto the property ladder earlier rather than renting or living at home.
· You can sometimes afford to shorten the term of the mortgage, thereby saving on interest.
· The formal cohabitation agreement helps to avoid conflict, which may not be the case if you buy with a spouse or partner.
· You share responsibility for the maintenance, repair and redecoration of the property.
· You share the household bills.
· You share the housework.

What are the downsides of joint ownership?
· You need legal documents, including wills, to protect your investment, which means additional costs alongside the usual house-purchase costs.
· One or more of you may wish to sell before the others are ready to move on and you may have to make alternative arrangements (such as finding a tenant) in order to pay the mortgage.
· Everyone is responsible for the mortgage, so if one person defaults, the rest of you have to cover the payments.
· You will need mortgage payment protection and life assurance.
· The process is quite bureaucratic and you will need records to keep track of payments, etc.

How much can I borrow?
The first things you need to consider when buying a property are how much you can borrow and what is the most suitable mortgage for your circumstances. Luckily, more and more lenders are offering mortgages for joint ownership

The two types of joint ownership - Legally there are two types of joint ownership. You can either own the property as ‘joint tenants’ or as ‘tenants in common’. Do not be put off by the terminology. It has nothing to do with tenancies and applies to freehold or leasehold land.

Joint tenancy - Under this agreement the joint owners together own the whole property and do not have a particular share in it. If one of the owners dies the other automatically becomes the sole owner. This would be the case even if a will had been made leaving the deceased owner's ‘share’ to someone other than the co-owner.

Tenancy in common - This is the opposite of joint tenancy in that the tenants in common each have a definite share in the property. For example A and B could own the property in equal shares, or A could own one fifth with B owning four fifths. This would be the most appropriate agreement where people want to own a property in separate pre-determined shares.

Under this form of ownership if one of the owners dies, his share of the property will pass on to whoever he specifies in a will, or if a will is not made, in accordance with the rules of intestacy (someone dying without leaving a will). If you are planning to make a will (and it would be wise to do so) you should have it drawn up before you sign the transfer deed that passes the legal ownership of the property to you. This way you will save the time, money and inconvenience of having to change your will.

Which form of ownership should you opt for?
This depends upon personal choice and your particular circumstances. The joint tenancy is most commonly adopted between married couples where there is perceived to be no advantage in defining separate shares in the property and where it would be the intention that on the first death the property would automatically pass to the surviving spouse. The alternative basis of a tenancy in common will often be used between brothers and sisters, parents and children, unmarried couples, business partners and the like. In these relationships it might be desirable for specific shares in the property to be identified and for each owner to be able to leave his or her share in the property to a named person other than the owner.
 
Note: The law is different in Scotland. A joint tenancy is achieved by what is called a 'survivorship destination' in the transfer deed and a tenancy in common is achieved by a destination to the buyers and their respective successors. The second alternative is the most common way of taking title to the property, which means that succession to the owners’ shares in the property will be governed by their wills or by the rules of intestate succession. 

Drawing up a trust deed or declaration of trust and a co-habitation agreement
It's important that you draw up an agreement between the joint owners that will include information such as who has put what into the property, who owns what and what happens in the event of someone wishing to move on. This is to reduce the risk of buying with someone else and is a way of putting measures in place to protect you.

A trust deed, or declaration of trust, sets out the share of equity to which each owner is entitled on sale. The owners can come up with whatever formula they wish for working this out and the formula might include reference to differing contributions to mortgage payments, household bills or maintenance costs, as well as initial contributions to the purchase price. However, it is entirely up to the owners how they want to work their final shares out when they come to sell, or terminate the arrangement. What is set out in the trust deed, or declaration of trust, will be definitive.

A cohabitation agreement regulates the day-to-day use, occupation and running of the property and can therefore cover a whole range of issues, which will vary according to the particular circumstances and what the individuals concerned consider to be their priorities. This might well include the proportion of the mortgage repayments to be paid by each party, but the fact that this is set out in the cohabitation agreement does not mean that it affects the split of equity on sale. This is governed by the trust deed, or declaration of trust, and it is in this document that the owners may include the proportions in which the mortgage payments are made in their formula for calculating their respective shares.

To make this joint property investment work you need to:
· Feel that the person you have chosen to invest and live with is trustworthy and is someone you could get on with.
· Draw up both a trust deed, or declaration of trust, and cohabitation agreement that you are both/all happy with.
· Be reasonable with each other, discussing and settling any possible areas of dispute.

You will each be putting down separate deposits on the property. You will probably want to set up a joint bank account from which the mortgage payments and perhaps other household expenses are paid. You may agree to make different payments into that joint bank account. These factors mean that accurate and open records must be kept so that when you come to terminate the mortgage, you will be able to see exactly what your shares should be.

How the profits from the house are split when you come to sell, will be covered in your trust deed, or declaration of trust.
You have to decide what suits you and how much flexibility you need. Work with your solicitor on this area.
You will need to discuss with your partner or partners how you intend to share out all sorts of costs, including how you split the costs of purchasing the property. It’s up to you in your unique situation to draw up the right documents to your satisfaction.
You will need to discuss at least the following and know what you agreed between you.

What you both or all decide about these issues will be covered in either the trust deed, declaration of trust, or co-habitation agreement:
· Amounts of deposits paid (the lump sum you have to pay at the beginning).
· How the equity is split based on payments into the mortgage when you come to terminate the mortgage or sell the property.
· What ‘share’ of the mortgage is each party going to pay?
· Home insurance: this will include insurance for the actual building, the bricks and mortar, and separate insurance for your furniture and possessions (contents insurance).
· Stamp Duty Land Tax.
· Solicitors' fees, searches, etc.
· Records of expenses on the house.
· House maintenance (decorating costs, roof repairs, etc).
· Improvements (such as a home extension, new window frames, etc).
· Cost of a surveyor.
· Mortgage payment protection.
· Critical illness /payment protection.
· How to value the house if one of you wants to sell.
· What happens if one of you dies.
· Make an inventory of key possessions.
· Make an inventory of any new shared items of furniture and furnishings.
· House rules – a partner moving in, etc.
· Pets.
· Smoking.
· Use of common areas.
· Guests/partners/girlfriends/boyfriends.
· Bills.
· Undesirable behaviour/unacceptable behaviour.
· Use of shared or sole-use equipment/furniture.
· Redecoration
· Alterations and improvements.
· Falling out.
· Lodgers/renters/how rental income is split.
· Another mortgage payer joining the arrangement.
· What happens if one party ceases to make life insurance premium payments or the mortgage payments - where the money will come from and how will it affect each other's contributions towards the property. (You can agree that the premiums are compulsory).
· Keeping up payments.
· Moving out if payments are stopped and not covered by insurance.
· Finding a tenant and tenant selection.
· What period of notice should be given and after how long.
· Remortgaging, selling or finding a tenant
· Cost of sale or remortgaging and finding a new property partner and who should pay or how it should be split.
· What you do if an owner wants to move out and not sell.
· What you might do if someone wants to sell up and the other doesn’t want to.
· Mediation.
· Splitting the goods and chattels.
· Agency fees if necessary, if you sell the property.
· Assessing relative equity, or negative equity, if you want to sell and the house has reduced in value.
· Insurance policies you decide to take out.
· National Insurance numbers could also be included to give extra security and peace of mind.

Remember, as time goes on, and any dispute or difference arises, it will benefit both sides to come to an agreeable compromise, even if that means someone moving out but retaining their stake and renting their room out. You both want the same thing - to get onto the property ladder in your own right, so work together, perhaps like colleagues on a project to help your own company.

Watchwords: resolution, not litigation.

Joint mortgages and how the finances could work when you buy with others.

More and more people are clubbing together to buy their own home. It enables them to get out of the rental trap and invest in their future. In many cases, sharing costs through joint ownership can work out cheaper than renting!

Having a joint mortgage means that you are both or all responsible for paying the mortgage payments. It does not matter from whom the payment is made, so long as the monthly repayments or interest are paid to the lender. When you come to terminate the mortgage, you will be able to look at your records to see the proportions in which the remaining equity should be split.

If any of the joint owners is unable to pay into the mortgage for any reason, the payments will still be required by the lender and alternative arrangements should be made to pay the mortgage or reduce the amounts that need to be paid.

As joint ownership is a developing trend, more and more mortgage lenders are offering mortgages designed specifically with joint owners in mind, and the choice of joint mortgages continues to increase. A typical example of what the mortgage lenders will lend is three times one person’s salary plus one times each of up to three other joint owners, but a recent new mortgage claims to lend three times combined salaries.

However, every pair or group’s situation will be different – each person may pay a different amount towards the deposit, or make different payments into the mortgage each month. Perhaps some will have parental involvement in the arrangement. Also, there are many types of mortgages available and various insurance policies that need to be taken into consideration.

If you rent out a room in the property to a lodger, the first £4,250 you earn this way may be exempt from tax. Visit the Inland Revenue for full details.
Tips for those using joint ownership/co-buying introduction services
This is a new concept in house buying and as such, takes a certain approach to be successful.
The process of contacting, shortlisting and choosing your property partner or partners will require patience, openness, persistence and maybe the ability to revisit possibilities and give second chances. Remember, this isn’t a dating agency; this is more of a business proposition.
Through the process of contacting, interviewing and assessing them, you will establish whether you feel you could live with each other.
Contacting your prospective joint buyer/s
· Contact one or more of the people on the list by email. Get to know each other a little.
· Speak on the phone if you wish.
· Arrange to meet with one or more of the prospective buyers, perhaps all together at a public place. Go through a process of elimination based on what each of you are looking for and find out whether you feel you could share a home with them. Well-publicised codes of personal safety should be observed when meeting up with people you have met through the Internet.
· Get to know them better by talking about your backgrounds, jobs, interests, houses, television, music, books, where you’re from, holidays etc.
· Discuss the elements of the trust deed or declaration of trust and co-habitation agreement and find out what your views are on various aspects of it. Look for any areas of compromise.
· Ask for character references. If you are apprehensive about proceeding without knowing more about your potential joint owners you may ask for proof that they have no criminal record or financial debts. Under the Data Protection Act, you are not able to have checks carried out on other people. It is up to the individual to gain proof that checks have been undertaken and to show you the original documents (not photocopies) confirming their records.

For documentation proving that you do not have a criminal record you will need to complete a Subject Access Form which is available from your local police station. This check will cost you £10. It is not as extensive as those undertaken by The Criminal Records Bureau. It is not possible for an individual to ask for a search by the CRB.

To get a record of your credit rating, you can visit www.myequifax.co.uk
 
· When you get to know each other better, see if your mortgages and deposits can get you the sort of property you want, or whether you need another partner to join you.
· If none of the original selection appeals – and someone might, a second time around – come back to the website to register for more names.
· You will probably have a joint mortgage and a joint account. You can pay different deposits and different amounts of the mortgage, and you might decide this gives you rights to varying proportions of the equity when you come to sell. This will all need to be detailed in the trust deed, declaration of trust or co-habitation agreement. Records will have to be kept to determine who has paid what towards the property.
· When you get to know each other well enough, perhaps you will want to see where you each live, to each gauge the other's lifestyle!
· When you have agreed on where you want to live, your budget and preferred property type, then it’s time to contact some estate agents!
· When viewing houses, think about whether you might want two living rooms, or two bathrooms, or to rent out a reception room as a bedroom.
· You should be very clear from the outset about what you expect from the property and how you see the space being used.

Useful websites
www.naea.co.uk – industry trade association for estate agents
www.estatesforum.co.uk – a community website offering independent advice to home buyers
www.cml.org.uk – Council of Mortgage Lenders
www.rics.org.uk – website of the Royal Institute of Chartered Surveyors
www.sfla.org.uk – industry body for solicitors
www.lawsociety.org.uk – industry body for solicitors
www.solicitors-online.org.uk – industry body for solicitors
www.landreg.gov.uk – industry body for solicitors
www.conveyancer.org.uk – industry body for solicitors
www.sspc.co.uk – industry body for solicitors
www.espc.com – industry body for solicitors
www.ofwat.gov.uk – regulatory body for water (utilities)
www.ofgen.gov.uk – regulatory body for gas and electrical markets (utilities)
www.ofcom.org.uk – regulatory body for communications (utilities)

By Helen Adams

www.FirstRungNow.com