Joint Property Ownership: What You Should Know

When buying a property with someone else – whether a spouse, partner, friend or family member – it is important to choose the type of joint ownership you want, and notify the HM Land Registry when your new property is registered.
The type of joint ownership you choose is a very important decision as it will affect what happens to property if one of the owners dies, or if the relationship with the other joint owner breaks down. Many buyers are not sure how the law really works in these situations and might believe that a Will is adequate to deal with problems that might arise. Others believe that their interest in the property is going to be equal to the proportion contributed towards the purchase, mortgage repayments and general investment in the property. In reality, it will all depend on how the property is held by them.

So what options are available? Evija Auzane of our Residential Property Department considers further. There are two ways in which the beneficial interest in the property can be held. One is 'joint tenancy' and the other is 'tenancy in common'.

Joint tenancy
This is when both individuals own the property in one undivided share and upon the death of one, it automatically passes to the survivor.  The interest will not form part of the estate of the deceased. The reality is that the joint tenants will own the property in equal shares and will be entitled to equal shares if the property is going to be sold.
Many couples believe in sharing all assets and follow the motto 'what is mine is yours'. They would want the other to inherit their interest in the property if one of them dies. This would be a typical reason to choose joint tenancy. There may also be inheritance tax benefits to holding the property as join tenants, particularly where there are children who will eventually inherit the property.

Tenancy in common
But what if you do not want to deny an inheritance to your family that is not a part of the joint tenancy? Or children from a previous relationship? This is when it might be wiser to choose a tenancy in common. Under a tenancy in common on the death of one of the tenants in common, their share in the property will pass under the terms of any Will left and not to the surviving tenant. If no Will was made, then under the rules of intestacy it will pass to next of kin. Couples who are not lawfully married cannot be each other’s next of kin. If you hold the property as tenants in common you have a divisible share which you both agree to and which could be in equal or unequal proportions. It is advisable to have a deed of trust setting out the terms of the initial agreement if you choose this method. Tenants in common is also chosen when co-purchasers who are friends or relatives pool their money to buy the property, or when couples prefer to keep their finances separately or their payments towards the property are not equal and they want to keep this proportion in case of the sale of the property.

Severance
Relationship and preferences in joint tenancy can change with time so you are able to sever a joint tenancy to create a tenancy in common. This can be done in several ways. One of them is serving a notice in a prescribed way on the other joint tenant. The shares will then be considered to be equal unless jointly agreed otherwise.Purchasing a property is stressful and there are a lot of formalities and paperwork involved, which buyers can struggle to deal with. Many may not know the implications of the type of shared ownership they opt for. Our duty as conveyancers is to guide you through the process and give you sufficient information to let you make an informed decision about how to hold the beneficial interest in your property, and to assist you in following the correct formalities to achieve that end.

If you require assistance with a residential property matter please get in touch with our friendly team on 020 7226 0570 or by email on enquiries@gelbergs.co.uk