When 2 or more people purchase a property together, there are 2 ways in which they can own their respective shares – as joint tenants or tenants in common.
The default position of ownership is joint tenants. However, there are advantages to owning property in both ways, so it’s important to always consult a skilled solicitor with specific knowledge in this area to advise you.
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What is a joint tenancy?
Joint tenancy is a form of property ownership where 2-4 people co-own property together. Joint tenants are effectively viewed as a single owner in law and each owner has an equal right to 100% of the property.
Joint tenancy is often the default position for homeowners when purchasing a property. Key characteristics of joint tenancies include:
- If 1 owner dies, the others automatically inherit their share. This is called the rule of survivorship
- An owner cannot leave their share of the property in their Will
- If the owners take out a mortgage they will be jointly and severally liable to maintain it. This means if you or any of the other owners cannot make payments, the lender can choose to pursue any one of you for the entire outstanding debt
- To sell the property, every owner must agree. This can cause difficulties where 1 owner is mentally incapable of making such as decision (for example, due to a brain injury or dementia). In this situation, another owner must obtain legal authorisation from the Court of Protection to appoint someone to make decisions on their behalf. This can be avoided by making a Lasting Power of Attorney before losing capacity.
This form of ownership is typically used by couples who would prefer binding their lives and finances together this way.
What is a tenancy in common?
A tenancy in common applies to owners who co-own a property in separate shares. These shares need not be equal and are distinct from the other shares in the property.
For example, 2 tenants in common choose to own the property in 30%-70% shares. If 1 dies, the other will not automatically inherit their share. This means shares in the property can be left to other people under a Will.
Technically, each share of the property can be mortgaged separately. However, in most situations, lenders will not allow this and tenants in common will need to get a joint mortgage.
Tenancies in common are particularly useful for friends, business partners, or relatives who want to buy a house together.
Joint tenancy vs tenancy in common
The table below sets out the main differences between joint tenancies and tenancies in common:
Tenants in Common
How property is owned
The owners each jointly own 100% of the property
Each owner has a distinct share of the property, which can be equal or unequal
How property is inherited
An owner cannot leave their share to anyone they like in their Will. After they die, their share will automatically transfer to the remaining owners
An owner can leave their share to whomever they like under a Will
How property is mortgaged
The owners can usually only get a joint mortgage for which they are all jointly and severally liable
In theory, the owners can mortgage their shares separately. However, most lenders will only allow joint mortgages
Who this form of ownership is most suited to
Spouses and partners
Friends, business partners, or relatives
Changing ownership from joint tenants to tenants in common
Although joint tenancies are the default form of ownership, you can easily change to tenants in common (or from tenants in common back to joint tenants).
To understand how to change the nature of ownership, it’s also important to understand how property ownership works:
How does property ownership work?
There are 2 levels to property ownership – legal ownership and beneficial ownership.
Legal ownership means the “official” owners who for most properties are registered at the Land Registry (with the right to control and sell the property) and beneficial ownership sets out financial interests in the property.
The legal title to a property cannot be split into shares, however, beneficial ownership can be split however you like.
Legal ownership and beneficial ownership are linked by a legal mechanism called Trust. Essentially, the legal owners are entitled to 100% of the property which they hold “on trust” for the benefit of the beneficial owners (as either joint tenants or tenants in common). In most situations, the legal owners and beneficial owners are the same people. However, the legal owner can also hold the property on trust for a third party beneficial owner.
Below are a few examples of how property ownership can work:
- 2 people legally own a property and are both also beneficial joint owners. They hold the property on trust for themselves
- 2 people legally own a property as joint tenants but beneficially as tenants in common in shares of 25%-75%. They hold the property on trust for themselves
- A child cannot legally own property. If a child inherits a property, it must be held on trust for them until they turn 18. However, while the trustee owns the legal title to the property, the child will be beneficial owner with the right to any financial benefit from the property
Declaration of Trust
A Declaration of Trust (also known as a Deed of Trust, Tenants in Common Agreement, or Tenancy in Common Agreement) is a legal document entered into when buying a property.
Essentially, the document sets out how the property is beneficially owned and in what shares, and how much money each joint owner put into the property. This removes any uncertainty when the owners come to sell the property or disputes arise about who owns what.
For example, you buy a property with a friend to which you contribute a 10% deposit, your friend contributes 5%, and you enter into a joint mortgage which you both contribute towards equally.
You enter into a Declaration of Trust stating the amounts you put in and specifying that upon sale of the property, you will receive 10% of the equity, your friend will receive 5%, and the remainder will be split equally between you.
In this situation, legally, you and your friend are joint tenants both entitled to 100% of the property, but beneficially, you are tenants in common with unequal entitlements to the financial benefits of the property.
This area of law can be complicated; however, our specialist conveyancing solicitors can provide extensive advice about whether a Declaration of Trust is right for you in your particular circumstances.
Notice of Severance
If you did not enter into a Declaration of Trust when buying your property, you can still change the nature of your ownership from joint tenants to tenants in common.
One way to do this is to enter into a Declaration of Trust post-purchase. However, this requires the consent and cooperation of all the owners. You can also become tenants in common in equal shares by severing the joint tenancy. You can do this without the other owners’ agreement.
This process involves completing what is called a “Form A restriction” which should be sent to HM Land Registry (this notifies the Land Registry that the property is subject to a trust). You must also serve a “notice of severance” upon any owners who do not agree to the change.
Once the joint tenancy is severed, you and the other owners will own the property as tenants in common in equal shares. You will obtain all the benefits of the tenancy in common, including the right to leave your share to whomever you like in your Will.
We can handle all procedural aspects of the change on your behalf as well as providing advice about the legal effects of severing your joint tenancy.
Changing ownership from tenants in common to joint tenants
This process requires the consent of all the owners and involves drafting a new or up-to-date Deed of Trust specifying the nature of your ownership.
We can provide advice in relation to the legal effect of changing to a joint tenancy as well as drafting, reviewing, and registering your Trust Deed with HM Land Registry.
Why choose Bird & Co’s conveyancing solicitors?
Bird & Co is a firm of specialist solicitors and legal professionals, each with years of experience providing advice to individuals and businesses across the country from our offices in Grantham, Lincoln, and Newark.
We have particular expertise in conveyancing and property transactions and we are accredited in the Law Society Conveyancing Quality Scheme in recognition of our skills. We are also accredited in Lexcel for our excellent client care and legal practice management.
With our enviable reputation for completing property transactions efficiently and cost-effectively, we attract clients from across the UK, particularly London, and abroad. We’ve therefore designed our client experience to be as flexible and convenient as possible.
We offer an online conveyancing service to cater to your needs no matter where you are in the world. We are Cyber Essentials certified and our totally secure systems mean we can exchange important legal information and documents safely. This means you need never come to our offices personally to see us (unless you want to).
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