7th October 2024

The Question of Ownership? Joint Tenants vs Tenants in Common

The Question of Ownership is one that will arise within the early stages of owning a property, whether it is with a spouse, family member or friend. In the UK there are two ways to hold property – as Joint Tenants or Tenants in Common. Both share fundamental differences which could impact the potential sale of the property if you are not aware of your responsibilities. This article will aim to provide a clear explanation of these differences and provide an outline of the benefits of each to better aid your decision.

 

Joint Tenants:

Joint Tenants own the entire property together, thus share equal rights and interests in the property. In other words, both parties own 100% of the property rights.

A key point of owning a property as Joint Tenants is that the ‘right of survivorship’ applies, so that upon the death of a joint tenant, the surviving tenant becomes solely entitled to the whole property, disregarding the deceased joint tenant’s Will as it falls outside of their estate for probate purposes. This means that the executors of the deceased joint tenant’s estate will not require a Grant of Probate to amend the title register for any property held as joint tenants.

This is why a joint tenancy is normally suitable for a married couple or cohabitees in a stable relationship, but those with children from past relationships may want to consider owning as Tenants in Common if they want their share of the property to pass to their respective children rather than the other owner.

 

Tenants in Common:

Tenants in Common own a specific share in the property, either equally or unequally. For example, one owner may own a 67% share in the property, while the other owner owns 33% which, for example, may be due to one person contributing more to the purchase price than the other. The varying ownership shares will be agreed between owners through a tenancy in common agreement or a Declaration of Trust so that it is legally binding.

Please note that a Declaration of Trust should be kept under review and if circumstances change a new Declaration of Trust should be prepared and registered with the Land Registry.

A crucial distinction between the two types of co-ownership is that the survivorship principle does not apply to Tenants in Common. This means that the deceased proprietor’s share of the property is distributed in accordance with their respective Will and not automatically to the other proprietor, thus giving you the choice of who will inherit your share in the property. This may be beneficial if you wish to distribute your share in a property to someone who is not the other owner such as your children or other family members, upon your death. Please note that Tenants in Common still require the consent of the other tenant to sell or transfer their portion of the property as there will be a restriction on the title preventing a disposal of the estate without the other owner’s consent. That being said, creditors may pursue your portion of the property if you fall into arrears.

You should review ownership and may want to consider owning a property as Tenants in Common where you and the other buyer are not married, nor in a stable relationship, where you and the other buyer are contributing unequal amounts towards the purchase price of the property, or where you are business partners or friends or if you want your share of the property to be gifted to someone else other than your co-owner on your death.

 

Changing Ownership:

Notably, it is possible to switch from owning a property as Joint Tenants to Tenants in Common and vice versa.

To switch from owning a property as Joint Tenants to Tenants in Common, one will need to sever the Joint Tenancy and register the severance with the Land Registry. This is done by entering a restriction on the title register. You should consider this if you want your share of the property to go to someone else other than the other owner. For example, if you are going through a divorce or separation and wish to leave your share of the property to your children. Or this may be part of inheritance tax planning.

The legal process of severance begins with a written notice of severance under section 36(2) of the Law of Property Act 1925 which must be served on the other owner unless an application for severance is made by both owners. Please note that if you sever a Joint Tenancy, one should prioritise making a Will so that it is clear how you wish to distribute your share in the property upon your death.

To switch from owning a property as Tenants in Common to Joint Tenants, one will need to remove the Form A restriction on the title register for the property. If you are thinking of doing this, you should review your Will to consider how this will affect your named beneficiaries.

 

If you would like advice regarding ownership of your property and reviewing your Will, please contact our Private Client team today by emailing info@bussmurton.co.uk or by calling 01892 510 222.

Louis Caller

Louis Caller
Paralegal