When purchasing a property with other people, you will need to consider carefully how you wish to co-own the property as this will dictate your respective shares and how any money is distributed on sale or death. You can co-own the property in one of two ways.
Joint tenants
This means that the owners own the whole of the property jointly between them and do not hold individual shares in the property. If you should split up and the property has to be sold then the net proceeds, ie the profit after all mortgages and other expenses are paid, will be divided equally. If either of the joint owners dies, then the property will transfer automatically to the survivor.
It is common for married couples and civil partners to hold a property as joint tenants so that the property automatically passes to the survivor when one of them dies, without the necessity for any legal formalities.
Tenants in common
This means that the owners each own separate and quantifiable shares in the property which can be equal or unequal. The proportion in which the owners pay the expenses and share any profits depends on the agreement that they have reached.
Upon death, the deceased’s share will pass according to the deceased’s Will or, if no Will exists, according to the rules of intestacy. It could be therefore that the share will not pass to the survivor, but could pass to the next of kin. It is vital to make a Will to ensure your shares are passed to your chosen beneficiaries.
Owning as Tenants in Common can be a good idea if, for example:
- one of the owners is putting a substantial deposit into the property,
- one owner owned the property previously in a sole name and then transferred it into joint names with a new partner but wishes to retain a larger share,
- one owner is going to be making substantially higher payments toward the outgoings
- one owner wishes to leave their share upon death to some other party e.g. children of a former relationship.
- For tax planning considerations
Comment
If you decide to co-own as Tenants in Common, it is highly recommended to enter into a Declaration of Trust agreement which will set out the shares in which you hold and any other provisions considered necessary to protect your interests in the property.
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Catherine Griffiths is an Associate & Licensed Conveyancer in our expert Residential Conveyancing team.
If you have any queries in relation to this article, please contact Catherine or another member of the team in Derby, Leicester, or Nottingham to discuss your circumstances.
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