As property prices have risen significantly faster than salaries , joint ownership has become popular. There are several ways people can own a property together. Both confer joint ownership, but there are some important differences that will affect how easy it is to force the sale of the property.
Tenants in common jointly own the property, but they may own a different percentage of it. However, ownership is by default, and this is the most common scenario. Joint tenants co-own the whole property, rather than holding shares that can be sold independently. The Land Registry will also have to be informed so that it can amend the title to the property. The process is fairly straightforward, and you can obtain an order for sale without appointing a solicitor.
However, if there are added complications, such as resident dependents, it may be wise to seek legal advice. The first step is to complete an N form. You will need to provide details of the outstanding debt and the estimated sale price as well as certain pieces of documentation, such as a witness statement that explains who the other owners are.
The form will be submitted to your nearest county court, which will reach a judgement. If the order of sale is granted, the property can then be sold. The claimant can request that specific conditions be attached to the order, for example, a minimum sale price.
The tenant or tenants who do not want to sell have the right to oppose the order and request that the claim is rejected or postponed. If it is possible to reach an amicable agreement to sell, this is always preferable for everyone involved. Consider inviting a mediator to join the discussion. A mediator acts as someone objective who can facilitate discussions and help the tenants reach an agreement.
Because they don't own the entire property, one tenant in common can't sell the entire piece of land or a home without permission from all of the co-owners.
If, however, all of the co-owners agree, the property can go on the market and get sold. If the property sells for a profit, each tenant in common walks away with a share of the money equal to his ownership share in the property. The same holds true if there is a loss. Each co-owner theoretically becomes responsible for his or her share of the debt.
Mortgage companies may not see things that way, however. Unless the real estate has fractional financing, mortgage lenders hold each and every co-borrower responsible for the debt.
If you have assets but your co-borrowers don't, the bank can force you to pay the entire debt rather than just your share.
Always be cautious if you're considering selling mortgaged property at a loss. A tenant in common may not have control over the entire property, but he does have autonomy over his own share.
If one tenant in common wants to sell his ownership, he may do so. One option is for the remaining tenants in common to buy him out. If you and your brother each own half of a house and he wants to sell, you may determine the fair market value of his share and purchase it from him.
If you do, you take over his share and now own the entire house. Your brother doesn't have to sell to you, however. He can sell to whoever he likes. If he chooses, he can sell his share of the house to his friend. If you hold the property as tenants in common, each of you will own a specified share in the property. Your shares may be equal, but they do not have to be.
If the property is sold, the sale proceeds can be either split equally or unequally. The presumption would be an equal split, but where monies are provided unequally a Trust Deed can be entered into between the parties which sets out the proportions owned by each party. If the co-owners are married, as tenants in common, when one of them dies their share would pass onto whoever is specified in their will. In the absence of will, the other spouse will inherit the deceased's share. When the co-owners are not married then on the death of one owner the deceased's share of the equity will not automatically pass to the surviving owners, but would pass according to the terms of the will.
This is especially important when your co-owner is not your next of kin, i. If you want your property to pass onto your joint owner in the event of your death, then you have to leave it to them in a will. Otherwise they will find themselves owning the property with whoever your next of kin is. It is easier to sell when you own the property as tenants in common because the property is held on what is known as a "Trust of Sale" which means that when one of the parties decides to sell, then the property needs to be sold.
The proceeds of the sale are split equally between the parties unless a Trust Deed is in place. This is a legal document which does two things:. Having a Trust Deed is very important because it means that people will have the ability to stay in their own home, even if their relationship falls apart. Joint mortgages are usually taken out by married couples but it is possible to take one out with your unmarried partner, a friend or a family member.
In fact, there are lenders who will allow up to four people to take out a joint mortgage. The benefits of taking out a joint mortgage are that by pooling your finances you will be able to purchase a more expensive property or, in the case of shared ownership , a bigger chunk of your new property. The downsides are two fold: the lender will look not only look at the earning potential of each of the applicants but also at their outgoings and credit score.
So if you're planning on buying a home with somebody with a poor credit score it can actually damage your chances of getting a good mortgage. Another potential problem relates to the mortgage. This means that should one of you default or disappear and fail to maintain the mortgage repayments, the lender could look to the remaining borrower for all of it.
This situation could also apply should one of the borrowers die. One potential remedy would be to take out a life assurance policy to repay the debt in the event of untimely death. There is a number of things to discuss before deciding on joint ownership of a home.
The first thing is to decide on the type of co-ownership you wish to choose. Secondly, decide on what documents you need to have in place to avoid problems in the future. Bear in mind that tenancy in common accompanied by a will and a Trust Deed will give you the highest level of protection.
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