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Keeping Property Purchase Fair

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Keeping Property Purchase Fair

 ‘Deed of Trust’ vs ‘Cohabitation Agreement’

When a couple buys or moves into a property, the need for a written record of ownership and occupation is crucial and often overlooked. This record can be a ‘Deed’ or ‘Declaration of Trust’, or a ‘Cohabitation Agreement’, but what’s the difference and which is best?  Partner and Family Law Specialist, Jonathan Whettingsteel explains.

Research in 2020 suggested that a quarter of all property purchases are funded by ‘The Bank of Mum & Dad’ (an increase from one in five the year before) and with the increased cost of living that figure is thought to be on the rise.

When a couple is purchasing a property together and one person or their family is making a larger contribution to the purchase price, a written record of who owns what share of the property is important, not just in the event for any dispute in the future, but for peace of mind in the present.

Without a written agreement, the legal starting position is that any equity from properties held in joint names is divided equally.  In the event of that being contested, it is possible to apply to the Court or purchase a property claim through a Trust or Proprietary Estoppel,  but this is always down to the discretion of a Judge, takes time and costs money.

For that reason, it is always best to have all matters of property ownership and occupation confirmed in writing prior to purchase and/or moving. Just like car insurance, you don’t wait until you have an accident before you take out a policy.

I have been consulted on many matters where the parents of one party have contributed to a deposit for their child and child’s partner, the relationship ends and legal advice is then sought when it is often too late.

Another scenario is when one party has contributed the deposit for a property purchase, the relationship breaks down and they have effectively given away half of it to their ex-partner.

There is also risk when someone moves into a property with a partner or friend. Even if they make contributions to the mortgage, if there is nothing in writing they have no financial interest in the property. That is why you need a Deed of Trust or Cohabitation Agreement.


What’s the difference?

A Deed or Declaration of Trust is used to simply record how parties hold the equity in the property, recognising a percentage of their interests or a fixed contribution. This tends to work better where parties are purchasing a property as business partners as an investment or to produce income.

A Cohabitation Agreement is more detailed, recording not just how a property is held, but also how the property is managed day-to-day (e.g. mortgage payments, how outgoings are split,  ownership of contents.) It can memorialise the financial interests parties have (or do not have) in a property, preventing the risk of application to Courts in the future.

It is also sensible to include who gets the first option to buy out the other party’s share in the event of a separation, and how long they have to raise the funds. It can also address how long parties can remain in occupation and how much notice will be given to move out in the event of separation. Cohabitation Agreements are usually better for parties who are going to be living together in a relationship.


What about rights as a ‘Common-Law Spouse?’

There are none.  The ‘common-law spouse’ is a term the law does not recognise.  The starting point would be to look at how the property is held on the Land Registry title. If this is held in the sole name of one person the starting point is that they own all of the equity in the property. The onus is then on the party who is seeking to establish a financial interest to satisfy a Court that they relied on intention and suffered a detriment as a result.


What about future marriage?

Marriage or the birth of a child can often impact a Cohabitation Agreement. Depending upon the wording of the agreement and any provisions contained within it, you may be best to then enter into a Pre-Nuptial Agreement.