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Buying a property with family? Read the small print

It is now increasingly common for siblings and friends to buy a property together and a recent court case shows how important it is not only to take independent legal advice but to make sure you read the small print of any documentation properly.

Brothers A and B bought a £750,000 flat in Hampstead, London in 2014 with money given to them both by their mother. Brother A and his wife and daughter then moved in.

But the brothers fell out after they both signed a legal document in a café which, unbeknown to A, gave law lecturer B the power to force the sale of the flat a year later and compel A, his wife and young daughter to move out following completion.

When A realised what he had signed, a court battle ensued during which Judge Michael Berkley found that supermarket worker A “had no express knowledge” of the sale clause and had “relied on” B “to explain the important part of the transaction to him.”

Careful what you sign

He went on to find that A hadn’t taken enough care about what he was signing and that even though B, who owned another two flats and wanted to sell the Hampstead property to finance another development project, had chosen not to explain the details of the express power of sale to his older brother, he was not to be blamed for that.

According to Judge Berkley,  B was reasonable in expecting his brother to take independent legal advice before signing the document and had complied with his ‘duty of candour’.

He said: “I cannot find that B did anything wrong. It is very unfair and inequitable to say that B asserted undue influence in anything that he did.

It was only right that both brothers should have a right to force a sale in the event of them “falling out or simply going their separate ways”.

“It is a perfectly ordinary power to include in a document of this sort – A is clearly not a details man.”

Expensive mistake

Judge Berkley issued an order for the sale of the flat, authorising marketing to commence within one month to give A and his family enough time to ‘adjust to the idea’ of leaving their home.

A is now liable for the £200,000 legal costs of the case although the judge agreed to consider a written plea for a reduction. 

Take legal care

Research has shown that 33 per cent of joint buyers, including friends, siblings and other relatives, would not put a legal agreement in place, despite putting down uneven deposits and 18 per cent say the reason for this is a fear of upsetting the other people involved – even though it puts them at risk of not getting their fair share if things fall apart and the property has to be sold.

It is well worth taking legal advice as soon as you plan to live together – and certainly before you sign anything – to find out what rights you do have, where you and your fellow buyer, be that friend, relative or partner, stand in all situations and what you can do to make your position more secure.

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