Buying a house with a friend

Posted on September 16, 2024

Getting onto the first rung of the property ladder is difficult at the best of times, but with finances for first-time buyers stretched in all directions many single people are finding they are priced out of property and so are turning to buying with friends.

Buying a property with a friend or a sibling is different from being a sole buyer, purchasing with a partner, or as a married couple. Things to consider in the conveyancing process are:

Communication between co-owners – it is essential to discuss any concerns and make informed decisions collectively with anything relating to the property. It is also advisable to have a plan in place on how to resolve potential conflicts between parties.
Seeking legal advice in respect of how a property is being held between the co-owners
Opening a joint account to deal with all matters relating to the property
Making a Will

Benefits of buying a house with a friend

According to research by Lloyds Bank about half of first-time buyers are considering non-traditional routes to getting onto the property ladder, with 22% buying with a sibling and 24% considering buying with a friend.

The reason stated in over 60% of cases is to make it affordable and 14% of first-time buyers stated that unless they shared the property purchase, they would be unable to buy. Many said they wanted to consider an alternative to parental contributions and the more traditional bank of mum and dad.

“Legally there are considerations when buying with a friend or sibling and making a shared property purchase,” said Conveyancing Solicitor, Michelle Ong.

There may be a disparity in deposit which both parties can pay, or the amount of mortgage each can afford could differ. However, a bigger deposit available through co-buying is also a consideration, and this bigger deposit means access to better mortgage deals. In addition, if both parties have a Lifetime ISA they can put LISA savings, plus the Government’s 25% bonus towards the purchase price.

If you’re buying a house with a friend, you’ll be able to split costs such as stamp duty, any repairs and alterations and this can be a great arrangement for younger people in their first experience of home buying when costs mount up.

Tenancy in common or joint tenancy

As co-owners, you can hold the property in one of two ways, as joint tenants, or as tenants in common.

Joint Tenants

This method of co-ownership is commonly used by married couples or those in a civil partnership because the right of survivorship makes it straightforward to inherit each other's shares in the property. If a joint tenant dies, the property immediately passes to the other surviving owner.

Tenants in common

Up to four people can be tenants in common for an individual property. If you hold the property as tenants in common, each of you will own a specified share of the property. If you hold as tenants in common, your share of the property can be passed on to another person, either during your lifetime or under your Will. If you do not have a Will at the time of your death, then your share will pass in accordance with the rules of intestacy.

You need to consider whether each person's share will be fixed from the outset or whether the shares will vary according to the financial contributions made by each person during your ownership of the property. If there are unequal financial contributions, then one should also consider entering into a Deed of Trust.

Deed of Trust

“Having a formal agreement regarding co-ownership and equity is essential as there will probably come a time when the property is sold, and any profits can then be split accordingly. A Deed of Trust is the best way to achieve this,” advised Michelle Ong.

“The Deed will help when it comes to selling up and how the sale proceeds should be divided up. At the same time, it’s always best to make or update your Will to take your share of the property into consideration.”

At Pearson Solicitors we have a dedicated and experienced team of lawyers within our Private Client department who will be able to tailor make a Deed of Trust that is catered to your individual needs.

How can we help?

For legal advice on buying a house with a friend contact our conveyancing solicitors on 0161 785 3500 or email enquiries@pearsonlegal.co.uk

Please note that the information and opinions contained in this article are not intended to be comprehensive, nor to provide legal advice. No responsibility for its accuracy or correctness is assumed by Pearson Solicitors and Financial Advisers Ltd or any of its members or employees. Professional legal advice should be obtained before taking, or refraining from taking, any action as a result of this article.