Wilson Browne discusses… buying a house

Assuming you have found a property to purchase and organised your mortgage, you need to instruct a conveyancer to deal with your purchase for you.

Take care, and make sure the quotes you obtain are inclusive, artificially cheap quotes can work out far more expensive as the extras start to be added on so check the small print.

If you haven’t already, consider instructing a surveyor to carry out a survey of the property, the seller is not obliged to disclose physical defects in the property so ensure you are happy before you proceed.

Be aware that your conveyancer will need to see evidence your identification and the source of your funds you are using to purchase the property – for example, copy bank statements showing the funds in your name. You will also need to provide evidence as to how the funds have been obtained, for example savings from earnings, a gift, inheritance etc.

Frequently, buyers will receive a financial a gift from family members to assist them with the purchase. Identification checks will also need to be carried out against those family members and the same evidence provided in respect of their source of funds so it is important to be prepared for this.

If you are purchasing the property with another party, you will need to consider how you will hold the property between you, joint tenants or tenants in common. There are significant differences between the two, so make sure you take the time to understand and that your instructions are clear.

Finally, be sure to read all reports and paperwork provided to you by your conveyancer and ask questions if you are unsure.

Be patient, this is likely to be the most expensive purchase you make during your lifetime, take the time to ensure you are happy.

When buying your first house you need to consider how the funds for the property have been raised. Namely, are you buying as an individual or are you buying with a partner or friend? If you are purchasing with someone else, how have the deposit monies been split?

If 50:50, have you considered who you would want to receive your 50% share in the property if you were to die? Firstly, you would need to consider the Rules of Survivorship which ensures that if you hold an asset as a joint tenant (rather than as tenants in common) then the surviving owner would inherit the asset is its entirety.

If you hold the property as tenants in common, then you need to consider putting in place a Will otherwise the Rules of Intestacy would apply. A Will ensures that your share in the property passes to those you want to benefit, but the Rules of Intestacy follow a specific statutory order and so people who you perhaps wouldn’t want to benefit would inherit your share in the property.

If you are buying as joint owners in unequal shares, with someone other than a spouse, it is worth considering entering into a Declaration of Trust. This protects the equity that you have put into the property from the net proceeds on the sale of the same. The Trust Deed can be prepared in such a way that it protects the initial investment and then the balance of any further capital growth can be divided between those parties to the Deed. Each Declaration of Trust is different and must be drafted in accordance with the individual needs of the parties to the same, so it is vital you seek legal advice concerning your ownership and investment when purchasing a property.

If you are an unmarried couple moving in together, we would recommend that you consider a Cohabitation Agreement.  This is because unmarried couples have fewer legal rights than married couples, and it is therefore important that you have conversations regarding your financial commitments to each other, recorded in writing, prior to commencing cohabitation.

A Cohabitation Agreement is a legal Deed signed by you both setting out how you will share finances while living together, or what will happen if one of you becomes ill, dies or you decide to separate.

The Cohabitation Agreement is a flexible document that can be tailored to meet your personal requirements. Common matters a Cohabitation Agreement will address include how much rent, mortgage or household bills each of you will contribute, arrangements for any joint bank accounts or pensions, identifying property or assets which are owned by each of you separately or together including those bought before or while living together, arrangements for pets and next of kin rights.

For the Agreement to be valid you will both need to enter into the terms of the Deed freely and voluntarily, the Agreement will need to be prepared in the form of a Deed, both of you will need to sign in the attendance of an independent witness and the document will need to be updated following any major life changes, or regularly reviewed.

If you are already married, or intend to marry in the immediate future, a Declaration of Trust will not be sufficient to protect any unequal equity contributions in the event of later divorce. A Declaration of Trust, usually prepared between two unmarried cohabitants to record how sale proceeds will be divided in the event of sale amongst other financial arrangements, can be set aside by the Family Court in the event of later divorce.

It is therefore our recommendation that, if one of you is contributing more towards the initial purchase price or mortgage repayments, or perhaps are using equity from a property you owned solely prior to cohabitation, a Pre or Post-Nuptial Agreement is prepared which will specify what will happen to the property in the event of later divorce. It allows you to confirm in writing that you do not want the standard position of an equal division to apply.

Pre and Post-Nuptial Agreements are not strictly legally binding in England and Wales, however, if prepared in accordance with the recommendations of the Court, they have a strong chance of being implemented subject to the terms being considered ‘fair’.  They should also be reviewed at regular intervals and after any significant life events.

If your deposit is from a relative make sure both you and they receive advice before gifting it.  Gifting is not always straightforward, the relative must have capacity to make the gift and gifting without fully understanding the implications could have tax or financial consequences for you and/or your relative.

If you have a gifted deposit from an elderly relative the gift must be from them and not someone acting for them under a power of attorney or a deputyship order, the attorney or deputy won’t have authority to do so without an order from the court.