Buying a house with a friend or member of the family

Page 1: Benefits and drawbacks
Page 2: Type of ownership

Hannah Shanks - Editor

Deciding type of ownership

There are two types of joint ownership to consider when looking to buy a house with a friend or family member, and co-buyers must select one type in the early stages of proceedings:

Joint Tenants

A joint tenant agreement means that each party has equal ownership of the property rather than a specific share. If one owner were to die the whole property would legally belong to the other owner regardless of the specification in the will. This is most often chosen by owners who don't foresee living separately in the future and would want their property to be passed to the other owner were they to die.

Tenants in Common

This means that owners specify how much of the property each party owns. If one party were to die their share of the house would go to whoever was specified in their will rather than automatically being passed on to the other owner. Having ownership of a specific share of the property also means that it is easier to work out how much of the equity should go to each party when selling the house. For these reasons, Tenants in Common is the type of joint ownership usually selected by owners who are friends, family relations or business partners.

Drawing up a co-habitation agreement

No matter how close the friendship or family relationship may be, it is well worth drawing up an agreement as an insurance against possible disputes. A co-habitation agreement will guide the two parties on how to resolve any disputes that may have been unforeseen at the beginning of the purchase, but it is not intended to allow one party to gain an advantage over the other. To form an agreement, it is recommended that the two parties draw up a draft document together and then give it to a legal advisor who will put the document in to a more appropriate format. The legal advisor could also act as an arbiter should a dispute arise and the arbiter's decision would then be binding.

There are various points to consider when drawing up a cohabitation agreement, and no matter how obvious it seems, it is wise to put every aspect of the ownership into writing. Legal advisors recommend that the agreement states:

  • Deposit paid by each party
  • Purchasing costs and solicitor's fees paid by each party.
  • How much of the mortgage repayment will be paid by each party.
  • How and when mortgage repayments will be made.
  • How cost of home and contents insurance will be shared.
  • How the day-to-day running costs of the house will be shared.
  • Furniture/shared items and costs as and when they are purchased.
  • House rules including unacceptable/undesirable behaviour.
  • Agreed policy for keeping up payments.
  • Agreed policy for the event of one party going into deliberate default.
  • Agreed policy for another mortgage payee joining the arrangement.
  • Agreed policy for breeching any of the co-habitation clauses.
  • Agreed policy were one party to die.

Drawing up a trust deed

A trust deed works in a similar way to the co-habitation agreement, allowing owners to avoid possible conflicts. The deed requires the owners to write down how much of the equity each party is entitled to on the sale of the house. There is no fixed way to work this out but may depend on contributions to the house deposit, bills or maintenance costs as well as mortgage payments.

Further information

There are a number of useful web-based resources to help you make informed decisions when buying a house with a friend or a member of the family:

SharingAccommodation is an easy to use site offering financial and legal guidance.

Go Direct has a lot of useful information for joint owners but particularly helpful is its mortgage repayment calculator which allows you to compare joint owner mortgage quotes from the comfort of your own home.


Property pros