Joint Ownership-Is there more than one type?

If you are buying a property together, you will each be a co-owner. As co-owners, you can hold the property in one of two ways:

• As joint tenants.
• As tenants in common.

Do not confuse this type of tenant with the sort that rents a property from a landlord. This guide should help in deciding what is best for your purchase.

Joint tenants-I am sure this is how my Mum and Dad own their property….

If you hold the property as joint tenants, both of you will together own the whole of the property. You will not each have a quantified share in the property and will not be able to leave a share of the property in your Will.  Should one of you pass away, the other will automatically own the whole property. The legal term for this is “the right of survivorship”

If you sell the property, or if you separate, it will be presumed that you both own the property equally, regardless of your respective contributions to the purchase price.

Married couples or those in a civil partnership commonly use this method of co-ownership because the right of survivorship makes away-no

Everyone’s situation is different and what may have suited long married parents, may not suit you.  There may be reasons not to become joint tenants. Here are a couple of examples:

Example 1.

Mary has inherited some money from her Granny and is lucky enough to have £20000 to put towards the deposit to buy a house jointly with her boyfriend Henry.  Henry has no money to contribute.

Mary and Henry should discuss whether Mary’s contribution should be protected in the event of a breakdown of relationship or her death.  One option would be to own the property as tenants in common, supported by a declaration of trust.  This will ensure that her monies are protected. See below for an explanation as to “tenants in common” and “declaration of trust”

Example 2

Mary and Henry are buying a house.  They do not need a mortgage and have provided equal sums towards the purchase price and expenses.  Both Mary and Henry have been married before and have children from their previous marriage.

In this case Henry and Mary should discuss what they feel should happen if they split up or if one of them passes away.  It is likely that either or both may wish for their share in the property be passed down via their Will rather than to each other.  They should take advice on Wills and Estate Planning once they have had a discussion. In order for either party to make provision in their Will as to their wishes, they cannot be joint tenants and must instead opt to be tenants in common, in this case they may agree equal shares given their equal contribution to purchasing the property.

Example one sounds like me ! What does “Tenants in Common” mean?

If you hold the property as tenants in common, each of you will own a specified share in the property. You need to consider whether each person’s share will be fixed from the outset or whether the shares will vary according to the financial contributions made by each person during your ownership of the property.

In coming to your decision, you should think about the following:

• If you opt for fixed shares, your shares may be equal, but they do not have to be.

Decide on respective shares. Bear in mind, you may need to revisit the split if there is a change of circumstances in the future which you want to reflect in the proportions in which you own the property. An example  of when you may want to reconsider the shares would be if only one of the co-owners pays the costs of significant improvements to the property.

If you hold as tenants in common, your share of the property can be passed on to another person, either during your lifetime or under your Will (which you should strongly consider making if you do not have one). If you do not have a Will at the time of your death, then your share will pass in accordance with the rules of intestacy.

If you wish to hold the property as tenants in common, it is always advisable for co-owners to enter into a declaration of trust, particularly where the agreed shares are unequal.

A declaration of trust is a document that formally records that you hold the property as tenants in common and sets out your respective shares in the property. If you sell the property, or if you separate, the declaration of trust will be referred to, to work out your entitlement to the sale proceeds from the property.

Deciding on the method of ownership

How you wish to hold the property must be your own decision and is something that you should keep under review following the purchase of your property. If you decide to hold the property as joint tenants but then wish to split your interests, you can “sever” the joint tenancy and turn it into a tenancy in common at any time.  Either one of the co-owners can decide to do this without the co-owners co-operation It is also possible for tenants in common to become joint tenants at a later date by entering into a new declaration of trust. All co-owners must agree to this.

You should be aware that if you decide to hold the property as joint tenants:

• Either party can sever the joint tenancy without the other’s agreement.
• The joint tenancy may be severed automatically in several situations, including where one party becomes bankrupt.

Is this something I can think about sorting out after we have bought the property-I have enough to do already!

Sorry!  You need to think about and discuss this now! It is important to specify now how you wish to hold the property, to avoid any uncertainty in the future. The consequences of failing to reach a decision and properly documenting that decision now, may include:

• The risk that a dispute may arise between you at a later date. This could result in litigation, which is often time consuming and costly for the parties involved.
• The possibility that a court may have to decide the shares in which you own the property. A court may divide the property in a way that differs from what you intended.

If you have any queries regarding the ownership of the property, please do not hesitate to contact me.

Issues related to joint property ownership

As joint buyers, you also need to think about the following issues:

• If you are entering into a mortgage, it is advisable to take out a suitable life assurance policy to cover repayments of the mortgage if one of you dies before you pay off the mortgage.
• It is important to make a Will (or to review your existing Wills) so that the property passes in accordance with your wishes. This is particularly important if you hold as tenants in common at the time of death.