If you are thinking about purchasing your property in joint names you will be asked which type of ownership is best for you: Joint Tenants or Tenants in Common. Which do you choose?
Joint Tenants
The use of the word “tenants” in this context has nothing to do with landlords and tenants.
Owning as joint tenants means that, on the death of either of you, the survivor will automatically inherit the whole of the Property. If you are a married couple, it may help to note that, in our experience, most husbands and wives choose to own their property on this basis, but there may be circumstances in which you should consider owning the Property as tenants in common.
There may, for instance, be 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.
Tenants in Common
Owning as tenants in common means that you will each own a distinct share. When a tenant in common dies, that person’s share passes by Will or, if there is no Will, in accordance with the rules of intestacy. It does not automatically pass to the surviving co-owner.
You may wish to have the ownership in fixed shares in which case those shares should be agreed between you and recorded in a Trust Deed. They can be equal (i.e. 50:50) or, to suit your circumstances, unequal (i.e. 25:75). If you have a mortgage on the property you may agree between you that one of you is responsible for a larger share of the mortgage payments than the other. This type of arrangement could be recorded in a Declaration of Trust
A Change in Circumstances
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 then 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 an Order of the Court.
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 then 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 an Order of the Court.
A Court will only order a sale if it thinks it is fair and reasonable to do so, but it is less likely to prevent a sale going ahead if there is a power to require a sale written into the deeds of the Property. 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. You may wish to give each other a right of first refusal – this is something that could be set out in a Trust Deed.
If you change your mind
You can always change the way in which you own the property in the future but that would need you both to agree and it would involve separate application being made to the land registry. If you purchase as beneficial joint tenants and one party subsequently wishes to convert that to a tenancy in common then this can be done by service of a notice however the default position then will be 50/50 shares which may or may not be fair. A beneficial joint tenancy can also be brought to an end by the bankruptcy of one of the parties, a charging order against one party’s equitable interest or some other conduct incompatible with the continuing joint tenancy. Severance of the joint tenancy is a technical subject and so the method of ownership should be given thought at the time of purchase.
You can always change the way in which you own the property in the future but that would need you both to agree and it would involve separate application being made to the land registry. If you purchase as beneficial joint tenants and one party subsequently wishes to convert that to a tenancy in common then this can be done by service of a notice however the default position then will be 50/50 shares which may or may not be fair. A beneficial joint tenancy can also be brought to an end by the bankruptcy of one of the parties, a charging order against one party’s equitable interest or some other conduct incompatible with the continuing joint tenancy. Severance of the joint tenancy is a technical subject and so the method of ownership should be given thought at the time of purchase.
The information given 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.
Please note this article is provided for general information purposes only to clients and friends of Hayward Moon Limited. It is not intended to impart legal advice on any matter. Specialist advice should be taken in relation to specific circumstances. Whilst we endeavour to ensure that the information in this article is correct, no warranty, express or implied, is given as to its accuracy, and Hayward Moon Limited does not accept any liability for error or omission.
Please note this article is provided for general information purposes only to clients and friends of Hayward Moon Limited. It is not intended to impart legal advice on any matter. Specialist advice should be taken in relation to specific circumstances. Whilst we endeavour to ensure that the information in this article is correct, no warranty, express or implied, is given as to its accuracy, and Hayward Moon Limited does not accept any liability for error or omission.