Warning on pitfalls of joint ownership

The National Association of Estate Agents is advising those looking to buy a home with family, friends or a partner to think carefully before committing.

Pooling deposits and income to purchase a property can offer huge benefits as competition within the property market increases in 2014. The latest NAEA market report shows that the number of house-hunters registering with member agents is at its highest level since May 2007.

Jan Hÿtch, president of the NAEA, said: “Joint ownership can offer a novel route on to the property ladder, especially if finances are tight. However, the decision to buy with another has to be taken objectively, and in the right circumstances. Even buying with a family member can pose problems if you are not wholly agreed on your intentions for the property.

“Buying jointly requires a lot of trust, transparency and good planning. Drawing up a formal legal agreement is one way to give all parties a degree of security, but ultimately taking the time to make a carefully considered decision is the best precaution you can take.”

For anyone considering a joint ownership arrangement, the NAEA recommends the following.

Have realistic expectations: If you are buying with a friend it is important to remember that circumstances like jobs, relationships and family can change, so always be honest when outlining your reasons for buying together. Purchasing in this way should be treated as dispassionately as possible.

Make sure you know whether the purchase is to be treated as an investment for both parties. If so, agree your preferred timeframe until resale and an acceptable level of profit. Always consult with an NAEA member to get industry-leading advice about likely property trends in any given area.

What’s the worst that could happen? One of the benefits of buying with friends or family should be an inherent level of trust. However, this doesn’t mean it isn’t worth consulting lawyers about a legally binding contract and agreeing in advance what will happen if one owner’s circumstances change.

There are mortgages specifically geared towards this type of purchase, so shop around for the best deal. Remember that a combined income may make it possible to secure a mortgage of higher value, giving you a wider choice of properties.

Always leave a paper trail: All paperwork relating to the property or mortgage must be in the names of the co-buyers. Remember to get any agreements written down to ensure there is always a record of joint decisions. Making copies of all documents is a good idea.

Remember to treat decisions about the house as business transactions, regardless of who you buy with, and ensure important agreements are in writing.

As well as any legal agreement, drawing up a comprehensive list of non-shared items or other costs at the start of the shared ownership can reduce confusion if a property is sold later. This measure should also be useful if one party decides to move out while retaining their share.