Decide on title deeds.
When buying a house with a friend in Scotland, you can either own it "pro indiviso" (in equal shares) or as joint tenants with a "survivorship" clause. The latter option is less common because if one party dies, their share automatically goes to the other. This can't be changed without the other’s consent - unless the clause states it can be revoked by either party individually.
Pro indiviso ownership, on the other hand, allows each person to own a share of the whole property, while respecting the rights of the other owner(s). Under this arrangement, if one party dies, their share will be handled according to their will.
For advice on whether pro indiviso or survivorship is most appropriate for your situation, it's best to consult a solicitor.
Create a Minute of Agreement.
If one party has paid more for the property than the other, you can create a Minute of Agreement (or a similar contract). This legally binding document protects both parties’ interests and spells out what happens if the property is sold and how the proceeds would be divided.
It can also include details about one party "buying out" the other if they want to sell, outlining how the price will be calculated and the timeline for the buyout.
Draw up co-ownership contracts.
A co-ownership contract is another way to protect everyone’s interests during ownership and clarify rights and responsibilities. To set this up, both you and your friend need to agree on:
● How much each of you is contributing to the purchase price
● The share of the property each party will own
● How ongoing costs (like mortgage payments, taxes, and maintenance) will be split
● The process for selling an individual’s share
● What happens if someone wants to exit the agreement
Because everyone’s situation is different, it’s wise to get legal advice when creating this type of contract. That way, everyone is on the same page and prepared for any future scenarios. Plus, having everything in writing helps prevent misunderstandings and ensures you can both enforce your rights if necessary.
Make a will.
Both you and your friend should have up-to-date wills to manage inheritance matters. Then, should one of you die, the will ensures their share of the property goes to the intended beneficiaries. Without a will, the rules of succession will determine how any assets are distributed, which might not align with your or your friend’s wishes.
Appoint a Power of Attorney.
Consider setting up a Power of Attorney (PoA) in case one party suddenly can’t manage their financial affairs due to illness or absence. A Continuing Power of Attorney gives someone else the legal authority to handle property matters, like house transactions and mortgages, on your behalf. This can be immediate or come into effect if you become incapable of managing these matters yourself.
Take out insurance.
Make sure you have comprehensive home insurance covering both the building and its contents. You and your friend might also want to invest in insurance policies to cover the mortgage should one of you die or be unable to work for a period of time.
Get legal advice.
When dealing with financial and property issues, both parties should seek advice from a solicitor. However, although one lawyer can handle the actual house purchase for two friends, they can’t represent both parties in formal negotiations or contract completions. Therefore, you and your friend should have different solicitors for some or all of the above.
So, if you’re looking to buy a house with a friend and want to keep things amicable, be sure to prepare thoroughly and look to get solid contracts in place. Buying a new place with a friend is such an exciting experience and when the times comes for one or both of you to sell up, you want to make sure your friendship is still in tact.
With thanks to John Roberts, Partner and Director at Austin Lafferty Solicitors.