Buying a house with friends or siblings

Buying with friends or siblings works on paperwork done before completion, not on goodwill afterwards. Three things decide how it ends. They are how the title is held, the declaration of trust, and the mortgage. This is general information rather than legal or tax advice.

Hold it as tenants in common

Joint tenants own the whole property together and the survivor takes it automatically on death, which suits couples and rarely suits friends or siblings. Tenants in common hold separate shares that can be unequal, do not pass automatically to the others, and can be left by will.

Friends and siblings are usually better off as tenants in common. Our guide to how to choose between joint tenants and tenants in common sets out the difference in full. The point here is that the choice is made on the transfer you sign at completion, not later.

The declaration of trust is the document that matters

The Land Registry’s guidance on private trusts of land explains that its transfer forms include a declaration of trust panel for when more than one person is buying. You can choose joint tenants, tenants in common in equal shares, or a third option where the property is held on trust on other terms. If a transfer just says tenants in common, it is not clear whether income and capital are shared equally or as the trustees decide, and a separate declaration of trust should be signed if you mean the second.

That separate deed is where the real agreement lives. It can record unequal deposits, who pays which share of the monthly payment, how repairs are funded, what happens if one owner stops paying, the notice period for forcing a sale, and how the property is valued if the others buy a leaver out. It does not need to be lodged at the Land Registry, so its terms can stay private.

When two or more people are registered as owners, the Land Registry normally enters a Form A restriction. If one owner dies and the survivor wants to sell, the survivor generally has to appoint another trustee to join in, so that everyone’s shares are protected.

Only four names can go on the title

A private trust of land cannot have more than four trustees. If more than four people are named as owners, the legal estate vests in the first four named who are willing and able to act.

Five friends buying together therefore have four legal owners and one person whose interest exists only in the declaration of trust. That person has no name on the register, so the deed is their only protection. If there are five of you, a declaration of trust stops being advisable and becomes the whole of the fifth buyer’s position.

The mortgage makes each of you liable for all of it

StepChange explains that when you take on a joint debt, you are each responsible for the whole amount and not just your own share, and that this includes a mortgage. If one of you cannot pay, the others are liable for the full debt. Your credit files are also linked, and a missed payment is marked on every borrower’s file, whoever missed it.

The declaration of trust records how you share the property. The mortgage is a separate agreement with the lender, and each of you stays responsible to the lender for the whole debt.

One existing homeowner changes the tax for everyone

Stamp Duty Land Tax applies in England and Northern Ireland. Scotland charges Land and Buildings Transaction Tax and Wales charges Land Transaction Tax. GOV.UK’s guidance on the higher rates says the rules apply to each person buying the property, and if any of you individually have to pay the higher rates, you must pay them for the transaction as a whole. In general that means anyone who will still own another residential property worth £40,000 or more after completion, anywhere in the world, unless they are replacing their main home. First-time buyer relief works the same way in reverse. You are eligible only if you and everyone you are buying with are first-time buyers.

Take three friends buying at £300,000 in England. If all three are first-time buyers, the relief covers the price up to £300,000 and the bill is nothing. If one of them already owns a flat and is keeping it, the higher rates apply to the whole purchase. That is 5% on the first £125,000, which is £6,250, then 7% on the next £125,000, which is £8,750, and 10% on the last £50,000, which is £5,000. The total is £20,000. One person’s existing flat moves the bill from £0 to £20,000, and the return is due within 14 days of completion.

Establish who owns what, anywhere in the world, before you agree the split. That belongs in the first conversation, not in the week before exchange.

Getting out when someone wants out

Where owners cannot agree, the Trusts of Land and Appointment of Trustees Act 1996 lets any trustee, or anyone with an interest in the property, apply to the court. The court can make orders about how the trustees exercise their functions and can declare the nature and extent of a person’s interest. That is the fallback if you cannot agree.

Write the exit into the deed instead. Set a notice period, a way of valuing the property that says how the valuer is chosen, and a window for the remaining owners to buy the leaver out. Our transfer of equity guide covers what that buy-out involves, including the lender’s consent.

When you compare quotes from conveyancing firms, check whether the quote includes drafting the declaration of trust. Our guide to how to choose a conveyancer covers what else to compare.