When a single person owns a property, that person is the sole proprietor, or sole legal owner. If two or more people own property together, they are co-owners. There are two types of property co-ownership: tenants in common and joint tenants. “Tenants” in this context should not be confused with a tenant under a lease; they are different legal concepts.
Under a joint tenancy, each person owns the whole of the property and has equal rights to the whole. The right of survivorship applies so that if one co-owner dies, the property automatically passes to the other co-owner. Joint tenants do not have a “share” of the property with which they can deal or pass under a Will.
Tenants in common
Under a tenancy in common, each person owns a share in the property. There is no right of survivorship and you are free to deal with your share of the property in your Will.
How you hold a property is detailed on the property transfer. It is possible to change co-ownership of a property and this is often done after a divorce, separation or marriage. Occasionally, co-ownership is changed automatically, for example, if one co-owner becomes bankrupt.
Property co-ownership disputes
The courts are regularly asked to resolve disputes between co-owners of property as to the rights each co-owner has when a relationship breaks down, if one co-owner dies or the property is sold. When you buy a property with someone else it is very important that you obtain legal advice on how you are holding the property. Having a clear structure in place at the outset will help avoid disputes in the future.
When purchasing a property as a co-owner, consider some of the following practical points:
- Take legal advice on which form of co-ownership is most suitable for you and ensure that this is clearly recorded in the transaction documentation.
- In relation to tenancies in common, it is always advisable to put in place a trust deed setting out each co-owner’s rights, share, entitlements and what would happen should one co-owner wish to sell but another object to selling.
- It is important to consider each co-owner’s contribution to the purchase price, any mortgage and outgoings for the property. If both co-owners are on the mortgage, there will be joint and several liability in the event of default which means that the mortgage company could pursue one co-owner for mortgage arrears if it so chooses. Putting in place a co-ownership deed, can cover these points.
- Disputes often arise when a single party purchases a property but over time another party contributes to the property by way of mortgage payments, outgoings, or even part of the purchase price. The legal title remains in sole ownership but one party may seek to establish a beneficial ownership in the property and attempt to prove that there was an agreed intention that both parties would be entitled to a share in the property. Seeking legal advice and putting in place co-ownership agreements will protect each party’s interest in this regard.
- A joint tenancy may not be appropriate if one co-owner has contributed a larger amount towards the purchase price than the other co-owner(s). You may wish the larger contribution to be recognised on any separation or sale of the property.
- A joint tenancy may also be unsuitable if you have family from a previous marriage and you wish to leave your share of the property to your children rather than your co-owner.
Bird & Co Solicitors are a long established solicitors firm with three offices in the East Midlands. We have a particular specialism in property transactions and conveyancing. If you would like more information or advice about the conveyancing process please contact us on 01476 591711.