With joint ownership becoming increasingly common amongst buyers, it is important to understand the legal implications when entering such an arrangement, B P Collins’ property team advises. Purchasing a property with another person triggers considerations for multiple areas of law, such as Real Estate, Family and Private Client.
Co-owners can hold a property in one of two ways: as joint tenants or tenants in common. There are key differences between the two, but the ‘right’ option depends on your personal circumstances and preferences. The differences are summarised below:
Joint Tenancy
Under a joint tenancy, each owner owns the whole of the asset equally rather than a fractional share. This is the default position even if each owner contributed different amounts to the purchase price, unless stated otherwise in the form of another agreement, such as a declaration of trust or cohabitation agreement. An implication of joint tenancies is that you will be legally viewed as one entity. This means that, when a joint tenant dies for example, their 50% share of the asset automatically passes to the surviving joint tenant, even if the deceased’s will specifies otherwise (known as the ‘rule of survivorship’).
Alternatively, if joint tenants choose to sell the property, they must either split the sale proceeds equally, or one co-owner must buy the other’s share.
Tenants in Common
Alternatively, holding a property as tenants in common means that each owner owns a separate share in the property, and these can differ in size. When a tenant in common dies, their share of the property does not automatically pass to the other tenant in common; it will pass to whomever they have named in their will as the recipient. If they do not have a will, it will pass to the beneficiaries in accordance with the rules of intestacy.
If tenants in common choose to sell the property, the sale proceeds will be split according to their shares. This allows any disparity in financial contribution to be legally recognised, keeping the co-owner’s shares separate for clarity and security.
Which is the right option?
There is no ‘right’ option. Choosing between joint tenants and tenants in common depends solely on individual circumstances and preferences.
If you are purchasing a property with a partner, it is often natural to purchase as joint tenants even if you have unequal contributions towards the purchase price. However, couples do not always consider the possibilities of relationship breakdown and the effects on their shares. In this instance, it may be worth considering purchasing as tenants in common as this provides an element of separation and freedom to control individual shares of the property.
B P Collins LLP will be able to advise you on the detailed differences between purchasing a property as joint tenants or tenants in common, and the implications in relation to tax, wills, and further agreements. Please contact our property practice if you would like further information at enquiries@bpcollins.co.uk or call 01753 889995.
