When two or more people buy a home together, they must decide which one of the two forms of co-ownership they want to use.
This is a straightforward guide to help buyers choose which is suitable for them. A Conveyancing Solicitor will advise on which is appropriate, but this should help you make a more informed decision. It is aimed at people buying a property for themselves, rather than on behalf of someone else, or as a business partnership.
The two forms are known to Conveyancing Solicitors as “joint tenancy” and “tenancy in common". (Note – when the words “tenancy” or “tenants” are used, this does not mean that there is a lease and the joint owners are tenants. )
The co-owners own the whole property in undivided shares – in other words one owner cannot say “I own half (or a quarter or any other share) of the property. ”
One very important feature of this method of ownership is that when one owner dies, the interest of that person disappears and legal ownership automatically passes to the survivor (or survivors, if more than one. ) This is known as the ‘right of survivorship. ’ and applies irrespective of any provisions in the deceased owners’ will.
While two or more people own a property as joint tenants it is not possible for any one of them to dispose of their interest separately because they do not have any ascertainable interest. It is only when the property becomes vested in a single survivor that he or she can deal with it as they wish. (Of course the property can always be sold or otherwise disposed of at any time by all the joint tenants acting together. )
This method of Joint Ownership has traditionally been recommended by Conveyancing Solicitors for married couples (which will now include civil partnerships) as it allows the survivor to take the whole of the property without worrying about any will or statutory intestacy provisions. The survivor can sell the property in their own name, without requiring probate.
Tenancy in Common
In this method of ownership each joint owner has a separate share in the property. They can have equal shares, or the amount of their share can be specified in any proportions that they choose.
For instance it is common practice when buyers contribute to the purchase price in unequal shares, for them to each own a share in the property in proportion to the amount they have contributed.
If property is to be owned in unequal shares, these must be specified either in the transfer to the buyers or in a separate trust deed.
Each owner can deal with their share separately, so they could transfer it or leave it by will to anyone they want to. However that does not entitle the beneficiary to occupy the property, they are only entitled to a share of the proceeds when the property is sold.
Which type of Joint Ownership right for you – things to consider
Many people now buy property in joint names without thinking of all the things that can happen in the future. For instance,
- one owner dies - who will then own the property?
- one loses his job and can’t afford the mortgage repayments
- how are proceeds of any sale to be split if one person has contributed a larger share of the deposit?
- partners split up and one leaves the house
- one wants to sell but the other doesn’t
- if the home is sold, how are the proceeds to be split?
For married couples some of these situations will be covered by family law, but others will have to rely on general property law. While co-owners may have thought they had an agreement on these points before they purchased, verbal agreements can be difficult to prove when there is a subsequent argument.
As mentioned above, traditional wisdom was that married couples should buy as joint tenants, but anyone else should buy as tenants in common. This is not a hard and fast rule, and how you wish to buy depends on your circumstances.
For these reasons your Conveyancing Solicitor may advise that if you decide to buy as tenants in common you should have a trust deed drawn up. The purpose of such a deed is to set out exactly what you want to happen in various circumstances.
Although such a trust deed will involve additional costs, it can be well worth the cost in the long run.
Why your Conveyancing Solicitor needs to know which form of ownership you require
On the transfer deed your Conveyancing Solicitor will have to tell the land registry which form of ownership you require. This is done by ticking one of three boxes on the standard transfer deed.
If no choice is made then the registry will assume that there is to be a tenancy in common, and will enter a restriction on the register.
When property is owned by joint tenants, it is possible for the joint tenancy to be severed, either by agreement or unilaterally.
How to know if you have a joint tenancy or a tenancy in common
If you have already bought a home, but don’t know whether you bought as joint tenants or tenants in common, you can find out by asking the Conveyancing Solicitor who acted for you. Alternatively obtain a copy of your title from the land registry http://www.landregistry.gov.uk/ – if there is a tenancy in common you will see a restriction in the following wording
"No disposition by a sole proprietor of the registered estate (except a trust corporation) under which capital money arises is to be registered unless authorised by an order of the court. "
If this is not registered then you hold as joint tenants.
The purpose of this restriction is to ensure that a single surviving tenant in common cannot sell the property on his or her own.
Getting further advice
This article cannot deal with such topics as splitting (or severing) a joint tenancy, transferring a share of equity to a co-owner, or disputes about who is entitled to occupy jointly-owned property. To obtain further information about these topics, contact your Conveyancing Solicitor or Fridaysmove on 0330 660 0286.
Joint ownership can be a complicated topic. This article does not look at the distinction between legal and equitable interests because it is assumed that buyers buying a home to live in will own both such interests, at least initially.
If you want to know more you should contact your Conveyancing Solicitor or Fridaysmove on 0330 660 0286.