Selling half of your house to a partner moving in: what you need to know

If you own your own home and have a partner who will be moving in, you may want your partner to share ownership of your house. 

This is a popular scenario, with many couples across the region making such a move, yet there are several matters to consider first before taking this important step. The legalities of this situation also vary depending on whether you plan to marry at a later date. 

David Connor, a director at WHN’s Rawtenstall office, who leads the firm’s services for individuals and families, analyses several different scenarios for selling part of your property to your partner and shares key advice.

Scenario one: Sharing the property as co-habitants

In this scenario, we look at couples who intend to share a house but are not married and the house is currently in the name of one party.

The benefit of agreeing to sell the half share is that it produces certainty moving forward in terms of exactly how much each party will receive on the future sale of the property.

Determining the value of the property

Before agreeing to sell a share in the property, it will be necessary to agree a value for the property. This may need some expert assistance to acquire, including several property valuations from estate agents.

If there is a mortgage on the property, then it may be trickier. You may need to re-mortgage in joint names or agree that the other party can join the mortgage and become bound by its terms and conditions.

To value the half share you will need to consider the value of the property less any outstanding mortgage and you may also include some notional costs of sale to achieve a net equity figure to arrive at that represents a value of half the share. Once that figure is settled the other party will need to have the funds in place to pay you.

It is important to note that a purchase in these circumstances may well attract stamp duty so take advice early on to understand the tax implications.

Registering the property in joint names

Once the transaction concludes then the property will be registered at HM Land Registry in the joint names of both parties. Both of you must appreciate your obligations under a joint mortgage if one is required.

It is important to remember that joint ownership will define how the proceeds of a sale will be split in the future irrespective of the contributions to the house or the household.

If the relationship breaks down later, the courts have power to order a sale of the property even if one party does not want this to happen. It may require one party to raise funds to buy out the other party and take on the mortgage (if applicable) in their sole name, to avoid the court ordering a sale. In such circumstances, both parties must agree the buyout price and the terms and conditions.

If you choose to agree the share in your house to be bought for less than the value, there may be inequity if the house was to be sold under the circumstances outlined above. Therefore, if you do think about selling a share of your property at less than its value, you should consider the percentage each party should hold if it is not going to be an equal share.

Options for shared ownership of a property

The way in which you hold the property should also be considered. As beneficial joint tenants you will each have the same interest in the property. This means that on the death of one party, the other retains all the interest in the house subject to any existing mortgage.

If you decide to hold the property as tenants in common, then you each hold a specified percentage in the house. That share may not automatically pass on death to the survivor. It will depend upon the terms of the will of the deceased party.

What if there is a mortgage on the property?

Of course, as in every mortgage situation, the parties will need to decide if they should hold some life insurance which will pay off the mortgage in the event of death of one party.

Scenario two: Sharing the property with the intention of marrying

The second scenario is where the parties who will be sharing ownership of the property intend to get married.

The same principles will apply as above to some extent, however, in the event of a marriage and a later divorce, there are important factors to consider.

What happens if we then get divorced?

If you share the house jointly, then marry but later divorce, the court will look at all the assets in the matrimonial pot and decide what should happen to those assets to meet fairness, contributions and needs as far as possible. There are statutory factors the court must take into consideration including things like contributions and needs as well as a host of other factors.

Thus, a jointly held property held as beneficial joint tenants may not result in an equal distribution on a divorce. In the same sense, a property held in unequal shares as tenants in common may not be distributed in that proportion. The courts may require a different solution to meet the needs and fairness in that case.

It is possible to enter a prenuptial agreement prior to marriage to try and define what can happen to assets but often the family home is a very important asset and so careful planning is needed. See also our article: Do I need a nuptial agreement?

As outlined above, the consideration of selling part of your property to your partner is a complex matter to consider. It is highly recommended to seek professional advice and guidance, as there could be taxation consequences especially if the property being transferred is not the main residence of the parties.

David specialises in all areas of family law and represents individuals seeking to resolve family law matters either by agreement or through court proceedings where necessary.

For further information on protecting your business in family law matters, call David on 01706 225621 or email him at [email protected].