07 June 2019
Baby boomer buddies buying a house together
There is a growing trend amongst baby boomers who have wealth tied up in their property and living on their own, to sell up and buy a house together with friends in their later years. Sounds like a great idea, but there are several things that need to be considered before moving in. B P Collins has a range of practices working together to provide you with complete protection that you will need.
When buying a home with friends in later life, you will become a co-owner. As co-owners you can hold the property in one of two ways, either as joint tenants or tenants in common. If you decide to purchase as joint tenants, upon your death, your friend(s) will automatically assume your share. However, this is not usually a recommended option when buying with friends, particularly if you have family.
The other option is to become tenants in common, where you can each own a separate share of the property which doesn’t have to be equal and is likely to depend on how much money each of you have contributed to the purchase of the house. If you pass away, this share can be passed on to your friends or family in a will.
Where you have contributed in unequal shares, or if you want to set out what would happen if one party wanted to sell, you should consider preparing a declaration of trust. A declaration of trust sets out what is agreed at the outset and avoids any disputes further down the line.
When thinking about how you’re going to pay for your share of the property, it may be the case that you’re able to buy your portion outright after making a profit when you’ve sold your own home. However, if you do need a mortgage it has become increasingly common for building societies to not impose an age limit on mortgage borrowers. However, most put the age you can be at the end of the mortgage term at 80 years old, so be mindful of this before you apply.
It’s vital to plan for the future before moving in with friends. There are several things you should do such as create a will to ensure your assets pass to the individuals you have chosen, rather than the intestacy rules applying.
In your will, you can give your interest in the property to your trustees to hold on trust for your identified beneficiaries. The trustees have the flexibility to decide how to deal with your share in the property based on the circumstances at the time. The trustees can be guided by a side letter stored with your will which you can change at any time without having to amend the will.
You can also specify that after you pass away, your friends can remain in the property for the rest of their lives and once the last surviving friend is gone, your share in the property will pass to your chosen beneficiaries.
Every member of the group should also set up a power of attorney, appointing people whom they trust to make decisions should they lose capacity. An attorney can make financial and/or welfare decisions on your behalf when you are no longer able to; this could include decisions about your share in the property.
It’s important that you discuss at an early stage what will happen if one party dies or loses capacity.
Additional advice for couples living together but not married or in a civil partnership:
It is vital to regulate your legal relationship with whomever you are living with and if living together as a couple, you need to make decisions about your household finances at the outset. This is important if you are to avoid a bitter dispute if the relationship breaks down and, for example, if living in a property owned by one of the couple, your cohabitee could seek to claim that payments they have made have resulted in them having an interest in the property if there is no agreement to the contrary.
To provide reassurance, a cohabitation agreement is very useful as it provides clarity and certainty about your positions before moving in together and typically records what you’ve agreed about financial matters (over and above interests in the property which would usually be set out in a separate declaration of trust) including the payment of household outgoings or the management of joint accounts and what happens if the relationship breaks down.
It might seem unusual, but for greater harmony in the relationship, and to ensure that expectations are managed, it can also include who is responsible for which household tasks or a veto on inviting friends or relatives without the other’s agreement!
Remember that these types of agreement are not just for the wealthy. The key purpose of such agreements is to provide clarity and to avoid potential future conflict, whatever your financial circumstances.
If you’re moving in together as friends or as a couple, it’s important to seek legal advice. Contact our teams by calling 01753 889995 or emailing firstname.lastname@example.org