Research by Zoopla has shown 68 per cent of people have no plan in place for splitting their property in the event that their relationship breaks down.
Over a quarter (27 per cent) of homeowners claim that the proceeds of the property they owned with their partner were not divided fairly when they split up.
Of these, 72 per cent said that their partner received more than their fair share, while 28 per cent admitted that they got more than they felt they deserved.
The research was based on a survey of 1,000 UK adults who had previously purchased a home with a partner, and a further 500 people who had purchased a home with a partner and subsequently split up.
Zoopla’s consumer expert, Daniel Copley, said people need to be aware that in reality break ups happen and so when buying a home with a partner it is important that each individual protects their investment.
“Otherwise, they potentially risk major financial losses in the future,” Copley said.
“People may assume they’ll come to an amicable agreement, but anyone who’s experienced a messy break-up will know that fairness and reason often go out of the window,” he added.
Copley warned that individuals putting money into the deposit are particularly at risk, because if their partner is contributing to mortgage payments, they could be entitled to half the home.
As the average deposit for a first time buyer in the UK sits at £59,000 according to UK Finance, this can amount to serious money Zoopla has warned.
The research showed that a significant amount of people face this exposure, as a quarter of those surveyed said they paid the entire deposit, while a further 43 per cent said they did not split it evenly.
In the event of a relationship breakdown, many people will rely on their property investment to finance their future living arrangements.
However women were more exposed on this front, with 47 per cent of those surveyed saying they had no personal savings whatsoever when they split up with their partner.
This was in comparison to 37 per cent of men.
Despite this, only 15 per cent of respondents said they took out a deed of trust or cohabitation agreement to protect their share of the property, and only 10 per cent had a floating deed or commensurate share deed.
Likewise, only 7 per cent had a property break-up plan clarified as part of a prenuptial agreement.
Difficult Conversations
Copley said it's vital that couples have these awkward conversations before buying a home together.
“Key conversations to have with your partner when buying a home are how you plan to split the deposit and mortgage and if you’ll split maintenance costs in line with this,” Copley said.
He added that it is also important that individuals find out if their partner has any debts, as the research showed that 45 per cent of respondents had no idea whether their partner was in any kind of debt.
Additionally over a third (36 per cent) had no idea what their partner’s salary was when they purchased a home together, while 69 per cent did not know what savings they had.
Some 10 per cent of respondents thought tackling potential break-up conversations when buying a home was just too awkward to handle, saying “it didn’t feel right”.
Behavioural psychologist and author Jo Hemmings explained that it’s natural to want to avoid these conversations but said it’s important that people face up to them.
“Money is always an awkward conversation to have. However, couples often end up arguing about finances because they don’t have a clear plan. It’s important to separate your feelings in your relationship from sensible, personal financial planning,” she said.
While it is important to start a conversation, it's perhaps more important to record your intentions in writing according to Caroline Holley, partner at the law firm Farrer & Co.
Holley pointed out that it's crucial that individuals are clear with their intentions. For married couples this may be through pre-nuptial agreements, but for unmarried couples things can be more complicated.
Holley said: “Although parties under English law are not able to claim against a cohabitant in the way they would if they were married, for example in relation to claims for capital or income, there are rights which can be acquired under the Trusts of Land and Appointment of Trustees Act (TOLATA) whereby one party may be able to claim an interest in a property even in circumstances where they made no financial contribution to its purchase.
"Taking early advice is therefore key – as contributions to the mortgage, renovation or refurbishment, or care and management of a property could all give rise to a claim.”
Holley added: “A person in a cohabiting relationship, as opposed to a marriage or civil partnership, does not acquire any rights to capital, or to continuing financial support. Therefore if one half of a couple buys under their sole name, the other party has no claim against them, or the property, arising from the fact they live together.
"However, it is possible that property rights could arise – contributions, say to a renovation or the mortgage, could allow the other partner to claim a stake. Because of this, payments on a property should be managed carefully.”
Adding to this, Farrer & Co property partner, Laura Conduit said if unmarried couples wish to protect their position they should purchase as tenants in common and instruct a property lawyer to prepare a declaration of trust, which can be noted on the land registry title.
"This deed can protect initial investments in unequal shares; ongoing unequal mortgage payments; and/or other arrangements such as rights of first refusal with mechanics to buy a party out in the event of relationship breakdown," she explained.
jane.matthews@ft.com
