Owning a property with another person

by Iain Mason

Published on 29th April 2024

If you are buying a property with another person, or several people, one important legal decision you must make is whether you will own the property as joint tenants or tenants in common.

While this sounds very legal and technical, in practical terms, we are referring to the actual value of the property – the beneficial interest. After all, we don’t physically move the house itself when we sell! Joint tenancy and tenancy in common deal with who owns the monetary value and how.

Your relationship with that other person – in other words, if they are your spouse, your partner, or a friend – is likely to dictate which type of tenancy best suits your circumstances.

The are two types of property home ownership: joint tenancy or tenants in common.

Owning a property as joint tenants

Under the rules of joint tenancy, the interest is not divisible, there is one ‘share’ owned jointly.

The key characteristic of joint tenancy is the right of survivorship. This means that if one joint tenant dies, their share automatically passes to the surviving joint tenant(s) without the need for probate.

Joint tenants cannot separately dispose of, or mortgage, their individual shares in the property. Each joint tenant has an undivided interest in the entire property. If you are a joint tenant you cannot leave your interest in the property to anyone else in your will.

Owning a property as tenants in common

As tenants in common, each tenant has a specified share of that property. This may not be an equal share. Between two people, they may be investing fifty-fifty, or perhaps one will own three quarters, with the other owning the remaining quarter. You may be investing with more than one person, and have a share each.

In the event that one of you dies, their portion (or your portion, if you have died) passes to the beneficiaries of the will.

If you are a couple it is likely that you will want your share to pass to your partner, but this must be specified in your will. If you don’t have a will, your estate – including your share of the house – passes to whoever is deemed to be your beneficiary. When that person inherits the share of the property, they may decide they want to sell up. This demonstrates how vital it is to make a will if you are buying a property, particularly if you are buying with someone other than a spouse.

It is also strongly advisable to draw up and sign a declaration of trust when buying a property as tenants in common. This sets out the details of the ownership, and can also include information about what you or your partner would like to happen if one or other of you wants to sell.

Which is best: joint tenants or tenants in common?

This depends on your circumstances. Many married couples opt to be joint tenants. However, if you are buying with a partner, and perhaps one of you has contributed more, you may prefer a tenants in common arrangement. It also means you can protect you investment if you were to separate.

What if you are married but you have children from a previous relationship? Here tenants in common may be a consideration, as you may want to pass your share of the property on to your children rather than your spouse. Remember, if you are joint tenants the house automatically passes to your spouse.

If you are tenants in common and you die, and your interest in the property passes to your children, you’ll probably want to ensure your spouse can remain living in the property. In this case, you can leave your spouse a life interest in your share, so they can live there for as long as they wish. However, once sold, your interest in the property passes to the beneficiaries named in your will.

Can you change a tenancy arrangement?

If you own property as joint tenants it is possible to change this into a tenants in common arrangement. Why might you want to do this? Possibly your relationship has broken down and you each want to protect your interest in the property.

It is important to seek legal advice before embarking on this route, as your lawyer will be able to take you through the process of changing the tenancy arrangement.

The mechanism involves first serving a notice of severance of joint tenancy on your co-owner and also registering a restriction on the Land Register, to ensure your co-owner can’t sell, transfer or re-mortgage the property without your involvement. If you have a mortgage, you should also notify your lender about the change from joint tenants to tenants in common.

What happens if relations breakdown?

It’s important to remember that, in the event of death or separation, partners who own a property together have less legal protection than those who are married or in a civil partnership. This is why it is so important to seek professional legal advice when buying property with a partner or friend, and ensuring you have the right arrangements in place about how the beneficial interest is held . Plus, it is essential to have an up-to-date will.

If you are thinking about buying a property with a partner, friend or other family member, then please get in touch with the property lawyers here at Optimum.

We help people who are buying and selling homes in Swindon, Cheltenham and the surrounding area, with conveyancing advice.

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