If you are thinking about buying a property together with your partner, a relative or even a friend, you will need to understand the basis upon which that property will be jointly owned.
The following guide looks at what is meant in law by a joint tenancy agreement in the context of shared ownership property rights, in particular where you would stand, legally speaking, in the unfortunate event that a co-owner dies or you decide to go your separate ways.
We also examine what other legal options are available in terms of joint property ownership, not least because the type of ownership you register with HM Land Registry will affect what you can each do with the property at a later date.
What is a joint tenancy agreement?
A joint tenancy agreement refers to property held under a shared tenancy by two or more people, where each holder legally owns 100% of the property with no identifiable or divisible share.
As joint tenants:
- Each owner will have an equal right to the entire property
- Where one owner dies, their interest will automatically pass to any co-owner(s) by the right of survivorship
- Share of ownership in the property cannot be passed under the terms of an individual will and last testament, nor under the rules of intestacy.
What happens if one joint owner passes away?
In practice, married couples will typically own their marital home as joint tenants, or as beneficial joint tenants as they are commonly known. In this way, each spouse will have a full stake in the property, where any share will automatically pass to the surviving partner on the death of the other spouse.
Accordingly, a beneficial joint tenant is unable to gift their financial interest in property owned under a joint tenancy agreement in the event that they pass away, either to any children or anyone else.
Instead, following the death of one spouse, the marital property will be fully owned by the remaining spouse to live in, sell or bequeath upon their own death within the terms of their will as they see fit.
What happens if we decide to split up?
Where property is co-owned under a joint tenancy agreement and you decide to go your separate ways, you will each be entitled to half of the sale proceeds, regardless of the level of financial contribution to the purchase price or mortgage repayments, or any other contributions towards the property or household.
If you own a property jointly with your partner, you both have an equal right to live there. If one person wants to sell, then both of you need to agree to this. It is therefore important to draft a document agreeing in advance what would happen in the event that you decide to split up.
Does a joint tenancy agreement give rise to any risks?
Although a joint tenancy agreement can be an ideal option for married couples, where they are happy to own and inherit the property between each other, for unmarried couples this is not necessarily the best option.
For couples who inadvertently co-own property as joint tenants, if either one of them passes away, their share will automatically become the property of the surviving partner.
This may mean, for example, that whilst the surviving partner is adequately protected, any children from a previous relationship will not benefit from their parent’s share of the jointly owned property.
That said, to own a property other than under a joint tenancy agreement requires some positive action on your part, or by a solicitor or conveyancer on your behalf. In short, unless you register a restriction against the property with HM Land Registry, the property will, by default, be owned as joint tenants.
What other joint ownership options are available?
Buying a property under a joint tenancy agreement is not the only legal option available to you. You can in fact own a property either as joint tenants or, alternatively, as tenants in common.
A tenancy in common refers to property held under a shared tenancy by two or more people, where each holder owns a distinct and transferable interest.
As tenants in common:
- Each co-owner will own a separate share of the property
- Where one owner dies, their share in the property will not automatically pass to any co-owners through any right of survivorship
- Share of ownership of the property will form part of the deceased’s estate and, as such, can be bequeathed under the terms of their last will and testament, or will fall to be determined under the rules of intestacy.
Co-owning a property as tenants in common is typically the preferred option where a property is purchased between friends or relatives, and often for unmarried couples.
In this way, you can each bequeath your share of the property to whomever you choose in the event that you die, rather than any such share automatically becoming the property of your co-owner(s). In the absence of a written will, your individual share will be inherited by your next of kin under the rules of intestacy.
Further, in contrast to shared ownership under a joint tenancy agreement, as tenants in common you can own unequal shares of the property, allowing you to reflect different contributions in either the purchase price or mortgage repayments, as well as general upkeep and maintenance of the property.
How do I check my joint ownership status?
If you have already bought a property jointly but remain unsure about the type of ownership under which the property is held, your legal title and ownership status should be recorded on the register of title to the property with HM Land Registry: as either joint tenants or tenants in common.
In order to own a property as tenants in common, by law a restriction will need to be registered on the title with HM Land Registry. This will protect the distinct and transferable interests of each co-owner.
Can I change the basis upon which a property is owned?
It is possible to change the basis upon which a property is jointly owned, for example, if you separate and want to leave your share of the property to someone else you may want to sever the joint tenancy agreement.
Alternatively, where a property is owned as tenants in common but you decide to get married, you may want to have equal rights to the whole property.
It is also possible to change from sole ownership to joint tenants or tenants in common, for example, if you want to add your partner as joint owner. This is called transferring ownership.
However, you should always seek expert legal advice here, as the legal implications following both the breakdown of a relationship or on the death of a co-owner can be far-reaching, depending on how you jointly own the property.
Is it important to get legal advice?
When deciding whether to buy a property under a joint tenancy agreement or as tenants in common, you should always seek legal advice from someone who specialises in property law.
The type of ownership of a property will significantly affect what you can do with the property if one owner passes away or if you decide to go your separate ways.
Your adviser can also draw up what’s known as a declaration of trust, setting out your separate and distinct shares where you decide to co-own a property as tenants in common.
The matters contained in this article are intended to be for general information purposes only. This article does not constitute legal advice, nor is it a complete or authoritative statement of the law and should not be treated as such.
Whilst every effort is made to ensure that the information is correct, no warranty, express or implied, is given as to its accuracy and no liability is accepted for any error or omission.
Before acting on any of the information contained herein, expert legal advice should be sought.