We're in this together
Article first published in Homelife in June 2017
For many people the purchase of a property, with its significant financial, practical and emotional implications, is a step taken together with another person, most often a spouse or partner. What, then, are the options when it comes to deciding how this ‘joint’ purchase will be made?
In relation to freehold (including ‘flying freehold’) property, Jersey law recognises two forms of property ownership: joint ownership and ownership in common. In the case of the former, which is by far the more common in practice, the property is acquired “jointly and for the survivor”. That is to say that upon the death of one of the two joint owners, the deceased’s interest will automatically vest in the survivor; the deceased’s interest in the property will not form part of their estate. Furthermore, in legal terms, all that each joint owner has whilst both joint owners are living, is an ownership interest which is conditional on the death of the other owner. As a consequence, neither joint owner has an interest which can be separately sold, transferred or charged.
By contrast, ownership in common involves each co-owner owning a separate legal interest in the property. This can be on a 50/50 basis or according to any other basis of division which is agreed between the co-owners and expressed in their contract of acquisition. Unlike the case with joint ownership, each co-owner’s interest can be sold, transferred or charged during their lifetime. On the death of a co-owner, their interest will form part of their estate and will pass according to the deceased’s will or, in the absence of a will, according to the rules of intestacy. Ownership in common can therefore be appropriate in a number of circumstances, such as in the case of a purchase by a couple where one of them has children from a previous relationship and wishes to ensure that they, rather than the other partner, inherit their parent’s interest in the property.
The situation is, however, different in the case of ‘share transfer’ properties. In such cases, the right to occupy the property (usually an apartment) arises from the ownership of a specific block of shares in the company which owns the underlying freehold (or leasehold) property. Such blocks of shares are legally indivisible and, like jointly owned freehold property, will vest automatically in the survivor when one of two joint owners dies.
So far we have considered the possibilities of when a property is acquired by two people. In some cases, a couple may decide that a property is to be bought in the name of one of them only. More often, such an outcome is not a voluntary one but the result of only one member of a couple being legally entitled to acquire it. In order to acquire freehold (including flying freehold property), it is ordinarily necessary to have either an Entitled or Licensed status for the purposes of the Control of Housing and Work (Jersey) Law 2012. (By contrast, there is no such requirement for purchasers of share transfer properties, though occupation is restricted to those with Entitled or Licensed status and their invitees, including partners.) A spouse or civil partner of a person with Entitled or Licensed status is permitted to purchase freehold property jointly with their spouse or civil partner, despite not being Entitled or Licensed in their own right. However, this right does not extend to partners who are neither married to nor in a civil partnership with the qualifying party. In such cases, although the purchase will in economic terms be a joint purchase, with the mortgage advance being made to both parties as joint and several borrowers, only the qualifying party can actually purchase the property.
Quite understandably, the non-purchasing party will wish to have their economic interest in the property recognised and it is common for the parties in such cases to enter into what are termed ‘equity agreements’, to record the parties’ respective financial contributions to the property purchase and to set out what is to happen if the property is to be sold. Agreements such as this certainly have their uses but it is important that they should be properly tailored to the particular circumstances of each case. The Royal Court was particularly scathing in a recent case where the parties had signed what was effectively an ‘off the shelf’ agreement, noting that the agreement which had been signed “was the lawyer’s solution to the fact that the parties were not married…which did not reflect the reality of the parties’ relationship”.
It will be appreciated that not all ‘joint’ property purchases have the same legal nature and consequences. Prospective purchasers should discuss the available options with their legal advisers to ensure that the arrangements which are put in place accommodate their wishes, taking account of any legal limitations.