Buying Property With Friends: Legal Structure, Risk and What to Agree First

Why Friends Buy Together — and Why It's Complicated

Purchasing property jointly with friends is increasingly common as house prices continue to outpace single incomes in most UK cities. Pooling deposits and mortgage affordability can unlock a purchase that would be impossible individually. However, unlike a couple with a long-term relationship and shared financial goals, friends bring different timescales, life plans, and financial trajectories to a shared property purchase. Without the right legal structures in place, the consequences of divergence can be severe.

The Two Legal Ownership Structures

English property law provides two ways for multiple individuals to hold property jointly:

**Joint Tenancy**

Under a joint tenancy, all owners hold the property as a single, unified interest. There are no individual shares. Critically, joint tenancy includes the "right of survivorship" — if one owner dies, their interest passes automatically to the surviving owner(s), bypassing any will. Joint tenancy cannot be severed to create unequal shares.

For friends buying together, joint tenancy is almost never the right structure. It creates equal shares by default and the right of survivorship is likely to produce perverse outcomes (a surviving friend inheriting a deceased friend's share over their family).

**Tenants in Common**

Under a tenancy in common, each owner holds a distinct, defined share of the property. Shares can be equal or unequal, and each owner's share can be left via their will. If one owner wants to sell their share, they can do so independently (though in practice this is complex — see below).

For friends, tenants in common with defined shares documented in a Declaration of Trust is the correct structure in almost all cases.

The Declaration of Trust: Why It Is Essential

A Declaration of Trust (also called a Deed of Trust) is a legal document that records the beneficial interests of each owner in a property. For friends buying together, it should specify:

• The percentage share each person holds
• How the deposit was contributed (and what happens if contributions were unequal)
• How mortgage payments, service charges, and maintenance costs are divided
• What happens if one person wants to sell and others do not
• What happens if one person stops paying their share of the mortgage
• The process for valuing and buying out a departing owner
• What happens on death

A solicitor will typically draft a Declaration of Trust for £200–£600, depending on complexity. This is a trivial cost relative to the transaction and an absolutely critical document for friends buying together. Do not proceed without one.

The Mortgage Problem: Joint and Several Liability

When friends take out a joint mortgage, each borrower is jointly and severally liable for the full debt. This means the mortgage lender can pursue any one borrower for the entire outstanding balance, regardless of their agreed internal share. If Friend A stops paying their portion, Friend B's credit rating is damaged and they may face repossession proceedings — even if they have been scrupulously keeping up their share.

There is no simple solution to this risk, but it can be mitigated. The Declaration of Trust should include clear remedies if one owner defaults on their mortgage contributions, including the ability to force a sale or buy out the defaulting party. Payment protection insurance for each party's share of the mortgage is worth considering but check carefully what conditions trigger a claim.

Key Conversations to Have Before Signing

The most common reasons friends fall out over jointly owned property are entirely predictable in advance. Have these conversations explicitly, document the agreed positions, and instruct your solicitor to reflect them in the Declaration of Trust:

**What if one person wants to sell before the others?** The default legal position gives a co-owner the right to apply to the court for an order for sale under the Trusts of Land and Appointment of Trustees Act 1996 (TOLATA). You can create contractual restrictions on this in the Declaration of Trust — for example, requiring a minimum ownership period of two years before any owner can demand a sale.

**What if one person wants to buy out another?** Agree in advance how the buyout price will be calculated. Independent RICS valuation is the standard approach; specify the timeline and dispute resolution process.

**What if someone's circumstances change dramatically?** Job loss, serious illness, relationship formation (their partner wants to move in), relationship breakdown — all of these affect a shared property situation. Consider each scenario.

**What about improvements to the property?** If one owner funds significant improvements, should they receive a greater share of the proceeds on eventual sale?

First-Time Buyer Status

If any of the purchasers has previously owned a property, they will not qualify as a first-time buyer for SDLT relief purposes, even if the other buyer(s) are genuine first-timers. All buyers must be first-time buyers for the first-time buyer SDLT relief to apply.

Getting the Data Right

Before any offer is made, ensure all parties have reviewed the key property data together. Property Passport UK provides a free overview of EPC rating, flood risk, tenure type, and sold price history for any property in England and Wales — a useful shared starting point for a group of buyers assessing their first joint purchase.