Tenants in common v joint tenants what does it mean

Tenants in common v joint tenants: what does it mean?

Buying a property can be exciting, but it can also be daunting. One of the questions you may be asked by your legal advisors is how you want to own the property.

When buying a property with someone else, there are generally two types of ownership, both with their own advantages and disadvantages; there is not a one-size-fits-all approach.

These two ownership types are (1) owning as joint tenants (also known as a ‘joint tenancy’), and (2) owning as tenants in common (also known as a ‘tenancy in common’).  

You and your co-purchaser need to determine what type of ownership works best for you. Getting it right at the time of the purchase can make life a whole lot easier in the future.

What is a Joint Tenancy?

As joint tenants, you and your partner both own the whole property, regardless of who pays the mortgage, or who paid the deposit.

In the event of the death of one party, the property ownership automatically passes to the surviving owner. This therefore prevents you from leaving the property to a third party in your Will.

If you wish to sell the property for whatever reason, you will need the consent of the other owner. A positive aspect of this is that your partner cannot sell their share and leave you co-owning the property with a random third party.

This form of ownership is generally more favored by married couples.

What is a Tenancy in Common?

As tenants in common, you will own a specific and defined share of the property with your partner. It may be a 50% share, or it may be more, or it may be less. It can be whatever split suits you, whether that is to reflect who is to pay the mortgage, or perhaps to reflect who paid the deposit for the property.

If you and your partner decide to sell the property, the proceeds will be split to reflect how the shares are split. If you own 70% of the property, you will receive 70% of the net proceeds of a sale. Unlike joint tenants, you can sell your share of the property freely and independently and you do not need the consent of your partner.

In the event of death, the deceased’s share does not automatically pass to the other owner, it will pass to whoever the deceased wishes under the terms of their Will. If they die intestate, their share of ownership will pass under the Intestacy Rules.

Summary

You and your co-purchaser should choose the ownership model that suits you, and taking account of factors such as:-

Ownership – Are you both comfortable with the principle of each of you having defined shares, and possibly unequal shares? Does that fit with the respective financial contributions to the purchase for example?  

Inheritance – Is it important for you to be able to pass your share to a third party beneficiary under the terms of your Will? Or is your priority for the share to pass to your co-owner when you die?

Sale – Should there be a breakdown in the relationship with your co-owner, how would you want the sale to be dealt with? Is your co-owner likely to grant permission for a sale? Are you content with the possibility of your co-owner selling their share to a third party?

Generally, a Joint Tenancy is more favored by married couples, whilst other owners such as siblings, business partners, or a group of friends who want to remain separate entities, commonly opt for a Tenancy in Common.

Whilst ownership is usually established when the property is purchased, it is possible to change the ownership should your situation change at a later date.

If you have any queries in relation to the issues raised in this blog, please contact Kay-C Stokes-Thomas in the Hughes Paddison Litigation Team at kcs@hughes-paddison.co.uk