I can’t afford to buy my own flat in London, so I’m thinking of buying with my best friend. We’ve known each other since primary school and are confident we can make it work out. What can go wrong?
A) We’re seeing this kind of arrangement more and more. And while it can work well, you need to be extra vigilant right from the off. Buying jointly without being married means you don’t have that legal framework to rely on if you want to go your separate ways. The first thing to do is draw up a “Declaration of Trust” on how the ownership is structured and how maintenance is paid for. Both a conveyancing solicitor and trust lawyer should be used to ensure the agreement is binding.
What do we need to sort out first?
The key question is who holds what equity in the property. One person may have more because they paid more of the deposit, the other may have a higher salary and pay more of the mortgage repayments. You also need to agree how you decide on (and pay for) ongoing maintenance.
My friend’s mum and dad are contributing to his half of the deposit; and mine are contributing to my half — what happens to our parents’ money?
Their interest needs to be protected. If a parent or a family trust contributes to the deposit this could be structured as a loan, in which case a loan agreement has to be drawn up and a legal charge should be registered against the property. I assume that you’re buying with a mortgage, so your provider will need to agree to this and will usually ask that their charge on the property takes priority. If it isn’t to be a loan, then the parent or family trust will likely want to be named in the Declaration of Trust. Because their name won’t appear on the property title itself, they will want to protect their interest and prevent the sale of the property without their written agreement.
What if, a few years down the line, one of us wants to move out or sell up? What happens to the house then?
It’s really important that you’re both upfront with each other about your expected timescale and when you would want to sell. This should also be included in the Declaration of Trust.
If one does want out, and the other party buys them out, they will need to be able to afford the whole mortgage, factoring in the extra costs of paying all of the insurance, council tax, maintenance and utilities. If this happens, then the property will technically be sold, and so there will be stamp duty to pay on the purchase too.
Suzannah Farnell is a Solicitor at Progeny Private Law
Overdue library work
We are having our home extensively remodelled, including the addition of a new library. The library is almost finished — and we’ve started moving in our bookcases and writing desks — but there’s still a lot to do elsewhere. The project is clearly in delay — it’s already two weeks overdue. However, when we tried to claim for damages, our builder refused, saying that, because we have “taken possession” of the library we cannot make a claim. Surely, he can’t be right?
There is an understandable desire to move back into a home as quickly as possible, even when construction work is not entirely complete. This is almost never a good idea. Most standard building contracts will consider your use of the library as you re-taking part-possession of your home and will restrict the amount you can claim.
But the other rooms they’re working on aren’t finished.
Your builder will still have to pay compensation for delays to those rooms, but the damages will be reduced. If, at the start of the works, you chose to state in the contract the rate of damages the builder will pay if the project is late (known as liquidated damages), then that daily or weekly rate would have been calculated by including the cost of renting another property until possession is possible. However, if you take back rooms in order to move in your furniture before the builder achieves practical completion of the entire project, that rate of damages will be reduced.
That’s utterly infuriating. Also, it now looks as though the delays could drag on because the builders seem to have taken their foot off the pedal.
Unfortunately, this can occur when a client takes part-possession. The builder realises that its liability to pay damages for delay is reduced and it can be tempted to move its labour on to more lucrative and less problematic contracts. You will need to keep the pressure on to get it completed as soon as possible.
It seems like we’ve rather dropped the ball on this. Is there anything else that can go wrong?
You should think about insurance. While the builder has possession of your home — to carry out the construction works — there should be insurance in place to cover any damage. However, since you have taken early possession, you ought to notify your insurers to make sure any damage to books or bookcases is still covered.
Jonathan Pawlowski is a partner and head of construction at Collyer Bristow
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