It makes sense for friends to club together so that they can buy properties they would be unable to afford by themselves. However, a cautionary High Court ruling recently reviewed by Rebecca Clark showed that such arrangements are only wise if lawyers are consulted so that all concerned know exactly where they stand from the outset.
The case concerned two work colleagues, one of whom had £50,000 to put towards the purchase of a home of her own. Her credit rating was, however, too poor for her to obtain a mortgage. She had discussions with her colleague (the landlord) as to whether the latter might be able to assist her in buying a property.
A suitable property was purchased in the landlord’s name. The purchase was mainly financed by a buy-to-let mortgage, but the tenant contributed her £50,000 and the landlord £60,000. The tenant had lived in the property under an assured shorthold tenancy for eight years since its purchase.