Joint Owners | Tenants in Common or Joint Tenants?

Co-ownership, Joint Ownership, Tenants in Common & Joint Tenants discussed.

This is what you need to know when you co-own (joint own) property with another person.

There are two types of ownership:

• Joint Tenants

and

• Tenants in Common

Think about which is best for you. It depends on your circumstances. You should understand the differences and implications before making your decision.

Joint Tenants

Joint Tenants means that each joint owner owns the whole of the property. When one joint owner

dies, their interest in the property disappears. No share of the property can be transferred to anyone else under the deceased joint owner’s Will (no matter what it says) nor under the intestacy rules (if no Will exists). The surviving joint owner is left automatically owning the entire property.

If sold during the joint owners’ lifetime, they will be entitled to equal share of the net sale proceeds, even if initial contributions differed. Although there can be exceptions imposed by Court Order during divorce / separation proceedings.

Many married couples and some long-term partners hold property in this way.

Tenants in Common

Ownership in common means that each joint owner holds a share of the property. They can agree to hold in equal or unequal shares. For example, two owners in common could hold 50% each, or 60% / 40% or 80% / 20%. When one owner in common dies, his or her share in the property will pass as per their Will. If there is no Will, it will pass to the next of kin under intestacy rules. Where the property is sold during the owners’ lifetimes, the net sale proceeds will be split according to these shares.

Circumstances where Tenants in Common may be preferred:

• either co-owner has a child or children from a previous relationship

• the co-owners are an unmarried couple or have not entered into a civil partnership

• one co-owner does not wish the property on death to pass automatically to the surviving co-owner

• co-owners made unequal contributions towards the purchase price and/or deposit

• co-owners will make unequal contributions to the mortgage payments and/or maintenance of

the property

• business partners are buying together

• co-owners are considering how to reduce the potential inheritance tax payable on their estates.

Regardless of the choice above all co-owners remain liable to the mortgage lender for the full amount of money owed on the mortgage. Plus, it is possible to convert at any time.

BUYING PROPERTY

You will need to specify which type of co-ownership you want. This is set out in the Transfer Deed (TR1) drafted by the Buyer’s Conveyancer. Your Conveyancer can also draft the Trust Deed to cover differing contributions and “who gets what” on eventual sale. This makes intentions clear. It is especially helpful if parties separate acrimoniously.

HOME OWNERS

Don’t worry if you think you got it wrong when you purchased. Joint ownership can be changed at any time. Speak to a Conveyancer yo have this updated.

WILLS

Property owners should also consider making a Will. Otherwise, your estate passes under intestacy rules. In other words, your home, and assets, may NOT go to those you would wish to benefit.

TRUST DEED (DECLARATION OF TRUST)

A Trust Deed is a legally binding document recording individual contributions to the purchase price and / or how the net sale proceeds are to be split on eventual sale. It is helpful to clarify what happens on sale if the Buyers should separate and it is not amicable.

If one party is investing significantly more money in the property it is advisable to have a Trust Deed prepared. This will provide certainty as to the parties intentions and can be relied upon in any future legal proceedings. The Deed will make clear who gets what on eventual sale after payment of legal fees, disbursements, estate agents fees and mortgage repayment.

A Trust Deed, or Declaration of Trust, is additional to your conveyancing matter and will require a further legal fee and it should be protected by registration of a restriction on the property deeds. The deeds are the office copies registered at HM Land Regustry. The restriction is registered at the same time as the purchase so the Trust Deed needs to be drafted, approved and signed before completion occurs.

You should also consider having a Will drafted when you own property. If you pass away without a Will your estate and assets are subject to intestacy law. This means your assets may not go to those you want them to.