Joint mortgage: Is it worth getting a pre-nuptial agreement?

The Question

My partner and I have been together for five years and have decided to purchase a property together. I have owned a home previously and have had the proceeds from the sale in savings whilst I’ve been renting. My partner is a first-time buyer and has a Help to Buy ISA. I will be putting more money into the deposit than him but he will be paying more of the mortgage as he earns more.

We were wondering, as we are going into this agreement with unequal finances, whether a pre-nuptial agreement might be sensible. We are not married so we are not entirely sure if this is possible? If not, is there another way we can set out our rights and define our assets before making such a big financial commitment?

Eve’s Answer

Thank you for your question. It’s prudent that you are considering how to protect your respective interests before making such a significant financial commitment. While a pre-nuptial agreement specifically applies to couples who are planning to marry, there are other legal options available to unmarried couples like yourselves that can provide clarity and security in this situation.

1. Cohabitation Agreement

A Cohabitation Agreement is a formal document that sets out your intentions and agreements regarding financial arrangements and property ownership while you are living together. It can include details such as:

• How much each of you is contributing to the deposit, mortgage and other property-related expenses.

• Who will pay for ongoing household expenses and maintenance.

• What will happen to the property and your respective shares in the event of a sale, separation, or other significant life changes.

By having a Cohabitation Agreement in place, you establish certainty and reduce the risk of future disputes, especially as your financial contributions to the property are unequal.

2. Declaration of Trust

A Declaration of Trust is another vital document to consider when purchasing property with unequal contributions. This legally binding document records:

• Your respective beneficial interests in the property (e.g., how much each of you owns based on your initial contributions or agreed percentages).

• How the proceeds of any future sale will be divided.

• Any agreed terms regarding adjustments to ownership percentages, such as if one party makes additional contributions to the property or its mortgage over time.

The Declaration of Trust can be prepared alongside a Cohabitation Agreement and should be registered with the Land Registry to reflect the agreed ownership structure.

3. Combining agreements

If you and your partner decide to marry in the future, you can complement the Declaration of Trust and Cohabitation Agreement with a Pre-Nuptial Agreement. This would provide additional clarity on how your respective assets and contributions would be treated in the event of a divorce.

Pre-nuptial agreements are not automatically legally binding in England and Wales, but they are increasingly upheld by courts if entered into freely, with full disclosure of assets, and where the terms are considered fair.

4. Why seek legal advice early?

Entering into a Cohabitation Agreement or Declaration of Trust requires careful drafting to ensure it reflects your intentions and complies with legal requirements. Consulting a solicitor early can:

• Help you determine the most appropriate structure for ownership (e.g., joint tenants or tenants in common).

• Ensure the agreement is fair, legally enforceable, and tailored to your specific circumstances.

• Avoid potential pitfalls, such as agreements that may later be challenged due to lack of clarity or improper execution.

5. Additional considerations

• Help to Buy ISA Rules: As your partner has a Help to Buy ISA, ensure that any plans for using the bonus are carefully integrated into your financial arrangements.

• Mortgage Agreements: If your partner is contributing more to the mortgage, it’s essential to clarify how this impacts your respective shares in the property. This can be addressed in the Declaration of Trust.

• Future Plans: Consider whether your respective contributions to the property or mortgage may change over time and how this will be reflected in your agreements.

Conclusion

Although a pre-nuptial agreement isn’t applicable in your current situation as an unmarried couple, a Cohabitation Agreement combined with a Declaration of Trust is a practical and effective way to protect your respective interests. These documents provide a clear framework for managing your property and finances, helping to avoid misunderstandings or disputes in the future.

It’s strongly recommended that both of you seek independent legal advice to ensure your rights are fully protected and that the agreements are drafted correctly. Taking these steps now will give you both peace of mind as you move forward with your property purchase.

Eve Geere is a partner in the family law team at Parfitt Cresswell