Usually, property transferring require the involvement of both individuals in the agreement. This is valid even if your partner moves out or does not commit to paying the mortgage payments. Both individuals share equal rights over the property. Thus, if you and your partner decide to enter into a joint property agreement with your partner, it is undoubtedly a good idea. Let’s first understand what joint ownership means?
What do you mean by Joint Ownership?
Joint ownership is an agreement where two individuals mutually decide to buy a property. Married or soon-to-be-married couples buy a home together. But joint ownership can be between friends, family, etc.
- Giving the complete property–transferring 100% to the partner
- Selling a part of the property–transferring 50% of the equity in the property
Under UK law, you can become the joint owner in two ways:
- Joint tenants
- Tenants in common
Thus, if you own the property as joint tenants, both of you will hold the property together. You don’t share the property individually and do not have a share. And can’t leave the share in your will. If one of the joint tenants dies, their share automatically goes to the surviving tenant, irrespective of the will. You should know this when entering joint ownership with another tenant.
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If your relationship has broken down or you no longer live together, sever the joint tenancy. If you fail to do so, the entire property will be transferred to the partner.
On the other side, if you own the property as a tenant in common, then you share the right to decide what happens to your share in your will. The primary difference between the joint tenant and the tenant in common is in the joint tenant agreement. You get the entire property if one dies, while it does not happen with a tenant in common.
As a tenant in common, you do not need to sever the agreement or tenancy as you hold and own the portions separately.
How To Legally enter into joint ownership with my partner?
Transferring property to the person of your choice is a conveyance process and usually requires a solicitor. It is a quick and inexpensive process, with the mortgage being the exception.
Completing the property transfer process in this way:
1. Property in the sole name
This is to add your wife as a joint owner to the property deeds. The partner is transferred with no upfront fee or consideration. And at the end of the agreement, you jointly own the beneficial interest.
2. Property owned jointly
If you own the property already. Here are a few options to consider for transferring the beneficial interest to your partner.
Deed of Trust: A deed of trust can declare an unequal beneficial interest between the two joint owners. In this, if you own the property as joint tenants, you will need to change the ownership of the tenants in common before registering for the deed of trust. It is impossible to own a property as joint tenants have a deed of trust.
3. Yet to purchase the property.
If you are yet to purchase the property, then it is better to buy as tenants in common and draft a deed of trust for clearly stating unequal shares in the property.
Before signing off the deed with someone, here is what you need to know:
1) You can’t step back
A portion of the deed is transferred to that person when they are added to the deed. Once transferred, you cannot take it back without the person’s consent. The owner has complete control over the portion, which can be leased out, mortgaged for small business loans for bad credit, or renovated.
That means if you want to refinance it, you will need the permission of the concerned partner.
2) Additional liabilities
For example, if you decide to add your brother to the deed and he misses on tax payments and eventually cannot complete so, has problems with creditors, or goes through a nasty divorce, his ex-spouse can claim the right over the property or the portion. He/she can set it up as a mortgage, which will prevent you from selling your house even if you have permission to sell it.
However, adding someone to the deed of the home can fume up income tax liabilities when the house is up for sale in the future.
3) Need permission from the lender
Before entering joint property ownership with your partner, ensure the mortgage things. Lenders incorporate a loan “due-on-sale” clause. It grants them the ability to call in the loan if the deed is transferred or the home is sold off. When one partner deeds off to someone, that means transferring a part of the ownership activates the “due-on-sale” clause.
Before agreeing, it is important to review the rules that govern it. And get permission from your mortgage lender before adding a partner to the deed.
How To Decide the Share of Each in The Joint Agreement?
i. Tenants in common
Tenants in common can decide the property share after terminating the tenancy. You can either own 50% of the share or own more than the partner owns. For this, you may contact a lawyer or financial advisor and reach a refined decision.
ii. In partner’s sole name
If your joint is in your partner’s sole name, then ensure there is trust in the agreement. It is critical because, in this condition, a part of the property belongs to you but in your partner’s name.
However, entering property ownership with your partner is fruitful for leveraging tax benefits and borrowing 10000 pounds UK without difficulties. In the event of a break-up, you may find it difficult to reclaim your benefits because the deed belongs to your partner. Think actively before transferring deeds to your partner.