If you’re an unmarried couple looking to buy a house together, it would be wise to consider the worst-case scenario before fully committing to the purchase of a property. Obviously, that worst case scenario is the possibility that at some point down the line, the relationship will end.
This matter is of growing importance as more and more couples choose to buy property together without getting married first, or ever, for that matter.
It is never going to be a particularly pleasant conversation, but the financial implications of not sorting everything out in advance of the property purchase can be devestating to one or both parties should the relationship end prematurely.
Treat the property purchase like a business decision
It is far better for both members of the couple to approach the purchase of a property together as a business decision. The facts are that both need to protect their part of the investment should the relationship end.
Even in a perfectly amicable break-up where both parties remain respectful and friendly with each other, it is important that the legal matters have been completed long before the jointly-owned asset needs to be divided up.
Common property-purchasing mistakes made by unmarried couples
Some couples enter into a property investment without fully understanding their partner’s credit history, which is a big mistake. Each member of the couple will be assessed individually, and the lower score of the pair will be the one considered by the mortgage lender. It is therefore crucial to be aware of each other’s credit rating before applying for a mortgage.
Another mistake is planning payments with promises. This is where it starts getting very messy if the relationship ends. Marriage has certain legal protections, but being unmarried means the couple will need to draw-up a legally-binding contract determining how much each party contributes to the deposit, how much equity each party has, and what each party will contribute towards the taxes, utilities, maintenance and the mortgage itself.
Unmarried couples really should (but often don’t) create a joint bank account out of which all payments for the property are made. Separate accounts can be maintained to receive salaries and other sundry payments, but the joint account is the best way of keeping a track record of every payment made as well as who contributed what and when.
Other issues for unmarried couples buying property together
Most mortgage lenders will want to know if the initial deposit or purchase amount is being gifted to the buying couple from a third party, usually their parents or some other benefactor. This potentially unequal contribution can influence how the asset is divided up in the event of the relationship’s end.
The couple should have a clear understanding (and legally-binding documents to verify) if the gifted deposit or purchase amount requires repayment at any stage or is intended as a one-off gift that does not require repayment at any stage regardless of whether or not the relationship ends prematurely.
What to include in either a pre-purchase or pre-cohabitation agreement is another big issue unmarried couples will need to deal with. These contracts will determine the rights of each party in the event of the relationship ending, allowing the asset and financial burden to be divided fairly according to who paid the most into the investment over the course of the relationship.
If you require information or assistance with regard to purchasing a property or creating a pre-cohabitation contract, speak to a team of dedicated professional solicitors at North Yorkshire Law.
DISCLAIMER: This article should not be regarded as constituting legal advice in relation to particular circumstances. This article is merely a general comment on the relevant topic. If specific advice is required in connection with any of the matters covered in this article, please speak to North Yorkshire Law directly.