In English law there are two options for owning property jointly: as joint tenants or as tenants in common. These two terms apply to both freehold houses and leasehold flats and so the co-owners are not tenants in the “normal” sense.

When buying a property jointly with another person (or other people) it is extremely important that you consider how the property is to be held before proceeding to completion of the purchase. Having said that, the type of ownership that is chosen at the time of purchasing is not set in stone and can be altered at any time. If circumstances change and the ownership is not correctly registered it could have undesired consequences. For example if one party dies and the type of ownership is incorrect their interest in the property may not pass to the person they had hoped it would.

Advice on how to own a property jointly should be given to you by your conveyancer at an early stage in the transaction so that you have ample time to reflect upon which option would be appropriate to your circumstances.

The two options:-

Joint Tenants

The co-owners own the property as a whole and do not have distinct shares. Using phrases such as “equally” “divided between” and “50:50” in the conveyance will usually have the effect of creating a tenancy in common even if it is intended to be a joint tenancy. It is therefore essential to obtain legal advice to make sure that you get this correct.

Right of Survivorship

The main feature of owning a property as joint tenants is the right of survivorship. This means that upon the death of one co-owner their interest in the property will automatically pass to the other co-owner(s) regardless of the contents of the deceased’s Will or what the intestacy rules provide if there is no Will. When there is just one owner left they will be entitled to the entire property and will then be able to deal with it as they see fit.

If a property is held as joint tenants and one joint owner dies then no formal transfer by deed is required and the change in the names of the owners registered at the Land Registry can be achieved by simply sending them a certified copy of the death certificate.

Tenants in Common

The co-owners each have individual separate shares in the property that need not necessarily be equal. Each co-owner is entitled to pass their share to a third party either during their lifetime or under the terms of their Will. The right of survivorship does not apply and the share does not automatically pass to the surviving co-owners on death.

If a tenancy in common is the preferred option then it is advisable for there to be an express declaration as to the size of the parties’ respective shares. Such a document is commonly known as a Declaration of Trust. It should not be left to be implied from the circumstances and the financial contributions made by each co-owner what their shares in the property are. There has been a great deal of litigation over the years between parties trying to establish their particular interests in property and it is an extremely expensive way of resolving an issue that could have been ironed out at the outset.

The most common reason for having unequal shares in a property is that each party made different contributions towards the purchase price and they wish to protect the level of their investment.

Declaration of Trust

The Declaration of Trust can set out not only the size of each party’s share but also put in place a mechanism for adjusting the percentages if one of the co-owners makes a capital contribution to reduce the amount of a mortgage or pays for significant work to be carried out; for example an extension. It will also usually set out how the arrangement can be brought to an end if, say, the parties fall out and one person wants to sell their share in the property.

To ensure that the end result is correct, it is fundamental that everybody fully understands and is happy with the manner in which the property is going to be owned. Advice should be sought from your conveyancer at an early stage.

For more information please contact Sophie Breakwell of William Sturges & Co at [email protected]