Although it is possible to purchase a property jointly without additional legal documents, having them in place can help protect both parties, while clarifying important aspects of ownership and responsibilities. 

So, what legal documents should you have in place?

Title deeds

In Scottish law, the title between multiple parties can either be taken “pro indiviso” (in equal shares) or equally between parties and to the survivor (known as “survivorship”). The latter is less common, as upon the death of one party, their share automatically transfers to the survivor. This can be rather inflexible and, if parties decide they do not wish their share to go to the survivor, it cannot be changed without the other party’s consent - unless specifically stated it can be revoked by either party individually. Although survivorship clauses are less common, they are sometimes used for tax purposes. 

When taken pro indiviso, each owner possesses a share of the whole property, subject to the rights of the other owners to share possession. Then, in the event of one party’s death, their position will be covered in their will.

In terms of choosing between pro indiviso and survivorship, a solicitor is best placed to advise on which option is the most appropriate.

Minute of Agreement

Should the title be in unequal shares (i.e. where one party has paid more of the purchase price than the other), a Minute of Agreement (or similar contract) can be drawn up. This is a legally binding agreement protecting both parties’ interests in the property. It stipulates what would happen if the property was to be sold and how the proceeds would be split.

This agreement would outline requirements for one party to “buy out” the other should they wish to sell. It can also cover the terms and conditions for that buy out - for example, how the price would be calculated and the timescales for completion.

Co-ownership contracts

Another legal agreement that can help protect everybody’s interests and outline their rights and responsibilities is a co-ownership contract. In order to get this document drawn up, both parties need to agree on:

    •    How much each person is contributing to the purchase price
    •    The portion/percentage of the property each party will own
    •    How any ongoing costs (e.g. mortgage payments, taxes, maintenance) will be divided
    •    What processes to follow should an individual want to sell their share
    •    What happens if an individual wishes to exit the agreement

As people have different circumstances, it is recommended to seek legal advice when drawing up a contact of this nature. It is important that all parties agree on its contents, so that everybody is well prepared for the future, whatever situation may arise. Plus, having everything set out in writing means neither person can misinterpret or misremember what was laid down, and both joint owners can enforce their legal remedies in the event of the worst happening. Prevention is certainly better than the cure!

Wills

It's important for both parties to have updated wills, especially when addressing inheritance. So, if one of the property owners dies, their will ensures their share of the property is distributed according to their wishes. An up-to-date will also protect the interests of both parties and their beneficiaries.

Should an individual pass away without having a will in place, rules known as the rights of succession will dictate how their money, property or belongings are distributed after their death.

Power of attorney

Consider setting up a power of attorney (PoA), as this can be useful if one party is unable to manage their financial affairs due to illness or absence. PoA (a Continuing Power of Attorney) grants legal authority to another person to act on their behalf regarding property matters, such as house transactions and mortgages. This may be given to take immediate effect or continue should an individual become incapable of handling such matters themselves. 

Insurance

Ensure comprehensive home insurance is in place, covering the building and contents. In addition, both parties may want to consider life insurance policies to cover the mortgage in case of one party's death.

Legal advice

When dealing with any financial and conveyancing issues, both parties must be advised by a solicitor. While it may be possible for a single lawyer to work for both on the actual house purchase (including receipt of individual funds and applying them to the purchase), they are unable to represent both parties in any formal negotiations or the completion of a contract to get to that. This being the case, each individual should have their own, separate solicitor from early on.

The key to successfully buying a house with a friend lies in thorough preparation, open communication, and having clear, well-defined contracts in place. Purchasing a property is likely to be the single largest financial deal any of us will be involved in, so be sure to seek legal advice to ensure the house-buying process goes as smoothly as possible.