More first-time buyers are getting onto the property ladder

There are still more first-time buyers than there were pre-pandemic, despite an 11% drop in 2022. While the cost of living crisis is causing financial hardship for many, first-time buyers may be under the assumption that house prices are only going to rise further and that they need to get onto the property ladder before they are priced out of it.

It is also perhaps not surprising that the percentage of first-time buyers sharing the cost of owning a home with a significant other. However, there is a distinction between living together as a married couple as joint mortgage owners, and as cohabitors where just one person is named on the mortgage.

Buying a house as a married couple

When a married couple takes out a mortgage, usually both parties will own a share of the equity in the property. This is still the case if the house deposit and mortgage are all under the name of just one person. This is because the law assumes a degree of shared assets in marriages and civil partnerships, although this might not be a 50/50 split.

Buying a house as an unmarried couple where both partners are named on the mortgage

When an unmarried couple buys a house together, and both partners are named on the mortgage, this is a joint mortgage and the rights of both parties are different than they would be in situations where just one of the parties is the named owner of the property and the couple is cohabitating.

The details of each person’s rights are usually detailed depending on the type of agreement that has been signed, such as a ‘joint tenants’ or a ‘tenants in common’ agreement. Having such an agreement should avoid future property disputes for cohabiting couples.

In a ‘joint tenants’ agreement, both tenants own an equal share in the property, regardless of how much each partner contributed to the deposit and mortgage payments, and should one partner die, their half would automatically pass to the other partner.

In a ‘tenants in common’ agreement, the partners agree to split the costs and shares of the property in a way that best suits their specific situation. Tenants in common can also leave their share of the property to someone other than the other co-buyer(s) in their will. This option may suit parents who want to help their children get on the property ladder or couples where one partner is contributing significantly more financially to the property than the other.

Unmarried couples where only one partner owns the property

Unmarried cohabiting couples do not have the same legal rights as married couples and, if they were to separate, this would not mean they are automatically entitled to shared assets and they would not be able to seek financial assistance.

When cohabiting with a partner who is not named on the mortgage, that partner is not automatically entitled to a share of the property. However, if they have contributed financially to a property or added substantial value to a property such as through renovation work, they could be entitled to a share of the property proceeds when it is sold.

Property disputes when cohabiting couples separate

Unfortunately, not all cohabiting situations work out, whether the couple is married or not. In these cases, disputes regarding who is entitled to what can arise at the end of the relationship. As mentioned above, these rights are outlined much more definitively for married couples and couples with a joint tenancy agreement.

In the event of a separation, each party will usually keep the assets in their own name. However, unmarried couples who buy homes together won’t necessarily get a 50/50 split of the home should they choose to sell it after the separation. Should the dispute go to court, other factors will need to be considered, such as the split in mortgage payments.

The importance of cohabitation agreements

There are legal documents that can be put in place to protect yourself and your assets in a property dispute should a separation occur, such as a cohabitation agreement. Cohabitation agreements are also known as ‘living together’ agreements and outline the rights and obligations of both partners when they purchase a house together.

A declaration of trust is a legal document that can be signed by both parties that outlines how assets such as the property will be shared should you separate from your partner. These agreements can also outline expectations of financial contribution, such as for mortgage payments, bills, maintenance and damage.

There are no laws in place that determine how assets will be divided when an unmarried couple who own a house together separates, so an agreement such as this is advisable before entering into a new mortgage with someone to protect everyone’s interests.

Conveyancing solicitors can assist clients in making key decisions when it comes to purchasing a property as an unmarried couple, such as drafting an appropriate cohabitation between the two parties to avoid future property disputes. If you are considering buying a home for the first time with a partner and would like to talk to one of our advisors, please get in touch.