Joint ownership: Should you own property jointly as Joint Tenants, or as Tenants in Common?
When two or more people buy a property together, while they will both legally own the property it is important to distinguish whether they ‘hold’ their joint interest in the property as Joint Tenants, or as Tenants in Common. This crucial issue should be determined at the time of the purchase, not least because of the legal implications when it comes to disposing of the property.
Although couples naturally hope they will never separate, this is an unfortunate fact of life. And when it occurs disputes can arise about who is entitled to what from the proceeds of the sale of the property.
Following a sale, after mortgages have been repaid and estate agents and solicitors fees have been settled, the balance of the proceeds will be split between the owners according to the form of joint ownership that applies:
If the owners hold the property as Joint Tenants there is an assumption the net proceeds will be split equally.
The most significant feature of a Joint Tenancy is that on the death of one of the owners their share will automatically pass to the remaining joint owner(s).
Tenants in Common
If the owners hold the property as Tenants in Common it is important for them to define their respective shares in the property (usually as a percentage) when they purchase it.
In this instance, on the death of an owner their share in the property will pass in accordance with the terms of their will (or under the rules of intestacy if they do not have one). It is therefore very important to ensure that your will is up to date if you hold property as a Tenant in Common, and that you have specified who you would like to benefit from your share when you die.
What to consider when owning property jointly
When purchasing a property with another person it is important that you consider whether:-
- You wish to own the property jointly with equal interests and on your death your share should automatically pass to the surviving owner(s); or
- You wish to own the property jointly with equal shares and on your death your share should pass in accordance with your will; or
- You wish to own the property jointly with unequal shares (for example to protect an owner who is putting more money into the purchase) and on your death your share should pass in accordance with your will.
A Tenancy in Common is appropriate where you are contributing more money to the purchase (eg from your own savings or from a gift/inheritance) and wish to retain a larger percentage share so that when the property is sold you receive a correspondingly larger share of the proceeds.It is also commonly used when someone wishes to ensure that their share will be passed to a third party who is not a joint owner, such as a child from a previous marriage.
Deciding what the percentage split should be is for you as purchasers to decide, but where we are dealing with the transaction our lawyers are always happy to discuss this with you. Once you have made the decision, we can prepare a Declaration of Trust specifying that on a sale, the net proceeds will be split in accordance with your agreed percentages. This Declaration of Trust will then be signed by all parties to show their agreement.
Should you change your minds later in life you can change how you hold the property at the Land Registry. However this can only be done with the mutual agreement of all parties.