If you are buying a property with someone else, deciding whether you will own it as joint tenants or tenants in common may determine your respective shares in the property. In particular, couples who are not married, or in a civil partnership, need to think about what will happen to their respective shares of the investment if one of them dies or they later separate.
Deciding to be joint tenants or tenants in common?
If you decide to be joint tenants you will own the whole of the property together, with a right of surviviorship. This means that if one of you dies, the surviving partner automatically becomes entitled to the whole of the property. It applies even if there is no will, or if the will does not refer to the surviving partner.
Tenants in common
If you decide to be tenants in common, you will each own a defined share of the property. This could be 50 per cent each, or whatever you decide. An unequal split may be appropriate if, for example, you have contributed different amounts to the purchase, or one of you is taking on more responsibility for the mortgage.
Your conveyancer can ensure the transfer deeds record the shares in which you both own the property. Alternatively, they may prepare a separate declaration of trust. Either would determine the split of any sale proceeds in the future, and head off a potential dispute.
When you die, your share of the property will be distributed according to the terms of your will. If you do not have a will, your share will be distributed according to the intestacy rules. It will not automatically pass to the other tenant in common, and they may be forced to sell their home.
Changing from joint tenants to tenants in common
If you start out as joint tenants and your circumstances change so that you no longer want to be joint tenants, you can serve a notice to sever the joint tenancy. This changes the joint tenancy to a tenancy in common. You might want to do this if your relationship breaks down or for inheritance or tax planning reasons. Your lawyer can prepare the appropriate notice for you.
Making the right arrangement for you
When buying a property, it is important to consider what you would like to happen in the long run. If one of you were to die prematurely or if you were to split up – what would you like to happen to the property?
Unlike married couples, or those in civil partnerships, couples who live together enjoy few statutory rights. It is important, therefore, to make sure the personal agreements you make now are effective in the future.
Being a joint tenant may provide more security for you and your partner. However, a tenancy in common coupled with appropriately worded wills could have a similar effect.
There are also different inheritance and tax planning implications for each option, of which you will need to be aware, especially if you have children from a previous relationship to consider. It is best to take independent legal advice before committing to anything and your lawyer will be able to advise you on your best options.
Splitting up and selling
If you decide to separate, one person may agree to buy the other out. Alternatively, you may decide to sell the house and split the sale proceeds. If you cannot agree, you can apply to court to force a sale and the net proceeds will be divided according to each of your respective shares.
If you are married, or in a civil partnership, regardless of who owns the property it is likely to be considered a joint matrimonial asset. The family court has a wide range of powers and can order a transfer of the property or delay the sale, especially if there are children living there.
Expressing your intentions
Clarifying from the outset how you own the property, and in what shares, can help to avoid disputes over your respective entitlements in the long run. In the absence of any other evidence, the court will presume equal ownership. If you believe you should receive a greater share, you would have to show that you both intended this. This can be hard to prove, even if you contributed to the purchase in unequal amounts. The best approach is to record your intentions formally when you buy the property, and make sure your wills are kept up to date.
If you are buying a house and would like advice about whether to be joint tenants, or tenants in common, contact John McAuliffe conveyancing solicitor/lawyer in our residential property team on 01732 770660 or email [email protected]
The contents of this article are for the purposes of general awareness only. They do not purport to constitute legal or professional advice. The law may have changed since this article was published. Readers should not act on the basis of the information included and should take appropriate professional advice upon their own particular circumstances.