If you are looking to buy property with your partner, a relative or friend, or perhaps you have jointly inherited a property, there are two different types of property ownership options: ‘tenants in common’ or ‘joint tenants’.
The type of ownership you register with HM Land Registry will affect how you legally own the property and what you can each do with the property at a later date.
Below we examine what is meant by the legal concept of ‘tenants in common’ and how, in practice, this compares to owning a property as ‘joint tenants’.
What are tenants in common?
A tenancy in common refers to property held under a shared tenancy by two or more people. As tenants in common each holder owns a distinct and transferable interest.
If you choose to own property as tenants in common this will have the following practical and legal implications for you and your co-owners:
- you will each own a separate share of the property
- each share does not need to be equally sized
- you can each leave your individual share in your will to whomever you choose
- where one owner dies, their interest does not automatically pass to any co-owner(s) by survivorship, rather it will form part of the deceased’s estate.
Where friends or relatives buy (or jointly inherit) a property together, they may opt to own the property as tenants in common. In this way, they can each own a different sized share, possibly to reflect different levels of contribution, for example, a two third by one-third division.
Furthermore, on the death of a co-owner, their individual share will be inherited by their beneficiaries in accordance with the terms of any will, or by their next of kin under the rules of intestacy.
In order to own a property as tenants in common 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.
What are joint tenants?
A joint tenancy refers to property held under a shared tenancy by two or more people, but here each holder owns 100% of the property with no identifiable or divisible share. As joint tenants:
- you will each have equal rights to the entire property
- where one owner dies, your interest will automatically pass to any co-owner(s) by the right of survivorship
- you cannot pass ownership of the property under the terms of your will.
In practice married couples will typically own property as joint tenants (or beneficial joint tenants as they are commonly known).
In this way, each spouse will have a full stake in the property. Further, their share will automatically pass to the surviving partner on death, irrespective of any separate wishes contained within a will.
Unless a restriction is registered with HM Land Registry, any property that you jointly own will be held as joint tenants.
Checking my joint ownership status
If you already jointly own property but are 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 tenants in common or joint tenants.
By law Land Registry will need to register what’s known as a ‘restriction’ where a property is held as tenants in common.
You may also be in possession of a trust deed, more commonly known as a ‘declaration of trust’. This is a document confirming the shares in which two or more individuals jointly own a property. Whilst there is no legal requirement to do so, the trust document may be registered at HM Land Registry.
Drawing up a declaration of trust
If you want to purchase a property as tenants in common and you want to set out your separate and distinct shares, you will need to draw up a declaration of trust. This is particularly important where you are looking to jointly own property in unequal shares to reflect unequal contributions.
The declaration of trust is legal proof of the actual proportion in which the property is jointly owned. The declaration of trust can be used in the following ways:
- to record the contribution of each co-owner to the purchase price
- to specify the respective beneficial interest of each co-owner, usually in percentage terms
- to formalise the ongoing contributions of each co-owner to any mortgage repayments and maintenance of the property
- to confirm the proportions to be repaid to each co-owner when the property is sold.
The declaration of trust will not, however, affect any obligations under the terms of a joint mortgage. Here you will remain jointly and severally liable.
Changing the type of joint ownership
It is possible to change the status of your ownership from either tenants in common to joints tenants, or vice versa. It is also possible to transfer sole ownership, adding a co-owner(s), so as to create either a joint tenancy or tenancy in common.
By way of example, if you get married and you and your spouse would like to have equal rights over the marital home, you can become joint tenants. Equally, if you get divorced and would like the flexibility to leave your share of the property to someone
else where the marital home is not being immediately sold, you may wish to become tenants in common.
To change your status from being tenants in common to joint tenants you will need the agreement of all co-owners. To alter your status from joint tenants to tenants in common, it is possible to do so without the agreement of your co-owner(s). Here you would need to serve on each co-owner a notice of severance of the joint tenancy.
You will need to register any changes with HM Land Registry. This can be done free of charge.
Common examples of tenants in common
There are various instances when owning a property as tenants in common may best suit your particular needs. Some common examples include:
- if you are jointly buying a property with your partner or spouse but contributing unequal shares and intending to keep your finances separate
- if you have children from a previous marriage and would like your children to benefit from your estate, provided you have made a will
- if you have got divorced and would like someone other than your ex partner to inherit your share of the matrimonial home.
Should I seek legal advice about my ownership status?
If you are thinking about jointly buying a property, you should seek clear legal advice as to the type of ownership that you would like to be registered with HM Land Registry: ‘tenants in common’ or ‘joint tenants’.
If you already jointly own a property, you may want to seek legal advice to establish the status of your ownership, or even to change the type of ownership to best suit your needs.
In particular, you should always seek expert legal advice if:
- You are contemplating jointly buying a property in unequal shares
- You are contemplating severing a joint tenancy and completing a declaration of trust to become tenants in common
- You are contemplating jointly buying a property and you have dependant children between you and your partner
- You are contemplating jointly buying a property and you have children from a previous marriage
- You have recently separated or got divorced.
The law relating to severance of joint tenancies and the legal implications following both the breakdown of a relationship or on the death of a co-owner can be far-reaching. If you are in any doubt as to your rights as either tenants in common or joint tenants you should always seek expert legal advice.