When buying a property what is the difference between Joint Tenants or Tenants in Common?
When two or more people own a property, they can do so in one of the following ways:
Owning as joint tenants means that, on the death of either of you, the survivor will automatically inherit the whole of the Property, regardless of any wishes made in the deceased’s Will.
If you are a married couple, it may help to note that, in our experience, most husbands and wives choose to own their property as joint tenants, but there may be circumstances in which you should consider owning the Property as tenants in common. For instance, there may be other people you wish to benefit, or who should benefit from a share in the Property on the death of one of you, in addition to or instead of your co-owner.
If you are an unmarried couple, you should carefully consider how you wish to own the property.
If you have made a decision to own the Property as joint tenants, you are not prevented from changing your mind later and owning the property as tenants in common.
It is important to note that you will own the Property in equal shares regardless of actual financial contribution. This means that if one of you contributes more capital to the purchase you will not be entitled to say that this should be given back to you when the property is sold. If you wish to protect your contributions then you should consider owning as Tenants in common in fixed shares.
Tenants in Common
Owning as tenants in common means that you will each own a separate share in the property.
When a tenant in common dies, that person’s share passes by their Will (or, if there is no will, in accordance with the law of succession). The share can be bequeathed to the other tenant in common or to anyone else.
You may wish to have a tenancy in fixed shares, in which case those shares should be agreed between you before exchange of contracts. They can be equal (i.e. 50:50) or, to reflect different contributions to the purchase price and the cost of buying the Property, unequal (e.g. 25:75).
Alternatively, you may wish the shares to fluctuate to reflect the way in which payments are made after completion of the purchase. In this case, it would be necessary to have a Trust Deed drawn up to regulate the position. Please let me know if you wish this to be done.
In making your decision, you should also think about what might happen if your relationship breaks down. If you can both agree on the sale of the Property and how the sale proceeds (after any mortgage has been paid back) are to be divided, there is no problem, but if one of you wants to sell and the other does not, the situation could get very complicated. You should bear in mind that one owner cannot insist on a sale of the property, against the wishes of the other, without obtaining a court order. Sometimes, the owner not wishing to sell buys the other owner out and takes over any mortgage – this is known as a transfer of equity. You should note that a Transfer of this kind will need the permission of the mortgage lender.
The information on joint ownership is for general guidance purposes only. If you are in any doubt as to what form of ownership is appropriate for your specific situation, please seek further advice.