Buying together

Join together to get on the ladder
11/07/04 00:00
By Louise McBride

Rising property prices are making it increasingly difficult for single people to get a foot on the ladder and, with prices continuing to rise, waiting around to meet a life partner before buying may not be an option.

An increasing number of people are realising that it makes more sense to get together with friends or family and put their money towards a property purchase, rather than someone else's mortgage.

Mortgage repayments often work out cheaper than rent, which is effectively `dead money'. Joint ownership means sharing the burden of getting a deposit together for a house, as well as paying for stamp duty, legal costs, surveyor's fees, insurance and other costs.

But before plunging in, it is important to be clear about your legal, tax and other obligations.

Preparation is key

No matter how strong a friendship or family bond, it is essential to set out responsibilities, plans and possible eventualities from the start. You are unlikely to share ownership for the rest of your lives, and the chances are that one buyer will want to move on in some years.

This could mean selling off that buyer's portion of the property.

Costs are likely to be incurred at this time. Unless this has been carefully thought out, things could turn ugly, even if your relationship with the buyer remains amicable.

“If buying a house with someone, agree who pays and contributes what,” said Patrick Dorgan, a solicitor with Coakley Moloney solicitors in Cork. “Ideally, you should make equal repayments on the mortgage.

“You've got to consider what will happen if one of you loses your job and can't keep up mortgage repayments. Plan for what happens if someone stops contributing their share of household expenses, or if one party dies or wants to move out of the business relationship in order to buy their own property or move overseas.”

It is important to establish basic house rules before living with another person, so that the relationship remains amicable.

Inheritance

The Family Home Protection Act 1976 protects the property rights of the family in the home.

However, unmarried couples and friends or relatives who buy a property together do not have the same legal rights and obligations as a family based on marriage.

If someone is buying a property with a friend or relative, ownership can be held through joint tenancy or tenancy in common.

With joint tenancy, the whole property is owned by two people. If one dies, the other person automatically owns the property.

Each person owns an equal share of the property.

With tenancy in common, each owner holds a share in the property, and this person's share automatically passes to his or her estate on death.

If you opt for tenancy in common and want to leave your share of the property to the person you buy with, you need to make a will and state this.

If all parties contribute equally under a tenancy in common agreement, a side agreement should be drawn up outlining individual contributions towards the acquisition and purchase of the property. This agreement should include the action to be taken if the business relationship ends or one owner dies.

The agreement should also outline what will pass to an individual's estate on death.

Equity investment

Regardless of whether you opt for tenancy in common or joint tenancy, it is important to protect the equity investment of each party buying the house.

For example, Maria and Carole are sisters who buy a house together. Maria puts €10,000 into the house purchase and Carole puts in €60,000. If Maria dies, her estate could claim entitlement to 50 per cent of the property, although Carole has invested much more in it.

“The respective equities must be tied up and recognised in a legal agreement outlining the input from the various parties,” said Paul Short, managing director with AJ Short & Associates, a Dublin life and mortgage broker.

An important step before buying a property with someone is to draw up a deed of trust with power of sale. By doing so, you ensure that the sale of the property cannot be blocked by one party if the relationship becomes sour or other problems arise.

“We can't emphasise how important it is to get legal advice in relation to respective rights down the line,” Short said.

Advanced planning key to peace of mind
11/07/04 00:00
By Louise McBride

Barbara is a young professional who bought an apartment in Stillorgan with a friend about four years ago.

Before purchasing, Barbara and her friend put together a draft plan so that, if one party wanted to opt out, they would first offer it to the other person. After that, the property would be valued and a price agreed.

Another option would be to rent the property if both friends wanted to sell it. “We were also advised by our solicitor to draw up a will in case something happened, so that each share of the apartment would go to each individual's family,” Barbara said.

“It's worked out really well.”

"My advice to anyone who is considering buying with a friend or relative is that you have to be careful who you pick.

“I was quite lucky in that I got on really well with my friend. I also wouldn't advise anyone to rush into it.”

Barbara and her friend bought the apartment equally. She said she would advise anyone considering joint ownership to do the same.

“A friend of mine went 48/52 per cent rather than half and half on a property purchase and one of them wants to pull out now,” said Barbara. “It's ended up being a complete nightmare for them.

“It is much less easy to divide costs and so on when there's not an equal split.” It's also important to include the ownership of contents, such as televisions, electrical appliances and so on in a legal contract, according to Barbara.

“Contents are not part of the property price as such, but can work out quite expensive.

"If you do buy specific contents, make sure you have them in the legal contract.

“Then you can say that you own them and know how to distribute them if one or both parties wants to pull out.”

First-time buyers need to improvise
11/07/04 00:00
By Gillian Nelis

At the end of last year, most estate agents were predicting that the rate of house price inflation would begin to slow this year.

But an improved economic climate and continuing low interest rates have resulted in strong price increases during the first half of this year.

The result is that first-time buyers trying to get on the property ladder are under more pressure than ever.

Figures from Permanent TSB and the Economic and Social Research Institute show that the average price paid for a property by a first-time buyer in May was €210,544. That was almost 9.5 per cent more than the €192,340 they were paying in the same month last year.

In Dublin, first-time buyers can now expect to pay around €300,000 to get on the property ladder. In Galway, two-up, two-down houses in the city centre are fetching €320,000.

A three-bed semi in the suburbs of Cork will cost €200,000, while similar properties in Limerick and Waterford are selling for €185,000 and €230,000 respectively.

As a result, purchasers have to be more inventive when it comes to buying their first property.

An increasing number of buyers are choosing to purchase with friends or family members.

According to David Cantwell of estate agent Hooke & MacDonald, the most common arrangement is for parents and children to come together to acquire a property.

“Rather than giving their children a big lump sum, many parents will instead take a 20, 30 or 40 per cent stake in the property and the child will then buy them out over time,” he said.

“We have also seen instances where groups of friends will come together to buy for a short period, usually between two and five years.

“They will then sell on and take their profit, which allows them to buy a place on their own.”

While Cantwell said that buying with friends or family could be a good way to get onto the property ladder, he warned buyers to take the necessary precautions before entering into such an arrangement.

“When it works, it can be a great way of buying property,” he said. “But buyers need to be very careful and to take proper legal advice because, if things go wrong, it can be an absolute nightmare.”

Cantwell said that cohabiting couples were often the least prepared when it came to sharing the purchase and ownership of a property.

“In the eyes of the law, cohabiting couples are no different to the person buying with their brother, sister, parent or friend,” he said.

“But while friends and family are usually very well organised when it comes to getting legal advice, couples can be very lax and don't think about what will happen if problems arise.

"We have seen cases where couples who have only been together for a relatively short time buy property together, then break up a couple of years down the line.

“If they haven't got a legal agreement, that kind of situation can get very messy indeed.”