Can you have unequal shares in a property?
01/11/2017
24,058
4 min read
Can you have unequal shares in a property? Yes you can. In England & Wales unmarried couples normally buy a property as tenants in common which means they each individually own a separate interest in the property and this is normally in unequal shares. Married couples buy as Joint Tenants which means they own the property 100% together.
Buying as tenants in common means that you can own unequal shares in the property. If you have a Joint Mortgage with Unequal Shares then you should look to draft a deed of trust to protect your individual interests in the property including:
- your individual deposit;
- how much you individually pay towards the mortgage; and
- what happens if someone moves sell.
A deed of trust is a legal agreement normally drafted during the purchase process, however you can set out your intentions after you buy. We provide a specialist deed of trust service so please call us if you need any help on 0333 344 3234 (local call charges apply).
Sharing unequal amounts - what happens if you fall out?
The benefits of buying a property with someone else are clear; bigger deposit, increased salary for mortgage calculation and ability to share the costs of living together. The downside is what happens if you fall out and need to leave? This is an awkward situation anyway, but how do you approach getting out your share of the property, especially if you've put in more than they have? It situations like this you'll be thankful to have drawn up a legal agreement at the outset that states who owns what.
If you don't have a legal agreement and there is an argument about how much you own, then you could have a very long drawn out legal battle.
Don't worry if you haven't got a legal agreement in place and you have already bought the property because you can get this drawn up now and it'll still protect your interests. We can help draw you up an agreement so please call us on 0333 344 3234 to discuss this further.
Legal Agreement for joint owners - protects more than just money!
When owning a property with someone else, whether friend, family member or a flat mate, you should have a legal agreement drawn up to protect your interests - especially if you own the property in unequal shares. The legal agreement should cover if:
- You fall out;
- Someone dies or disappears;
- You get repossessed (your share of anything left once the mortgage is repaid);
- Someone becomes bankrupt (Read about Joint Owners in Bankruptcy);
- You leave, how much you benefit from any increase in the property's value.
Here's an example of owning a property as tenants in common (unequal shares)
When you buy a property in a group as tenants in common (unequal shares) you choose a bedroom for yourself and the rest of the property is shared. The share of the initial financial investment is based on how much you have contributed to the purchase.
Example of an unequal deposit
Jane, Michael & Michelle are buying a £250,000 house with a 10% deposit. The stamp duty is £2,500, solicitor fees £529 and Land Registration is £135. The total cost is £28,164. This is how their unequal shares are set out:
Invested | Share | |
Jane | £10,000 | 35.5% |
Michael | £5,000 | 17.7% |
Michelle | £13,164 | 46.8% |
In Michael’s case, he will own a share of 17.7% and if the property increases by £25,000 then his share will be £4,425 plus his original deposit of £5,000; totalling £9,425. This doesn't factor in any repayment of the mortgage which would also be split.
Is buying unequal shares in a property with someone else a good idea?
Yes it can be especially if it is the only way you can afford to buy a property. By joining forces with a partner, friend, flat mate or family member you can pool your resources to make your financial position stronger; either a greater combined salary for the mortgage multiples or a larger sized deposit. Additionally, there are other advantages to owning a property as tenants in common and in unequal shares - you can use it, for example, to make your tax planning more efficient as a married couple.
One thing that is clear is that when owning a property jointly with someone else as tenants in common (unequal shares) you need a robust joint ownership agreement between you to protect your individual share of the property. We use our Deed of Trust as a legal document to protect people when buying together as it clearly sets out the ownership between each of the parties involved regardless of how this is divided.
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