| Co-ownership of property: An explanation of the difference between joint tenancy and tenancy in common |
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| This article explains the difference and answers the question of “what are joint tenants” and “what are tenants in common”. At the end of the article you’ll find links to Net Lawman legal documents for joint tenancy and tenants in common. |
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| Introduction |
| These archaic expressions are based in The Law of Property Act 1925. Property may be “owned” by between one and four people: if by more than one, it is said to be held on trust for any number of people. These people have a “beneficial interest” and they are referred to as “tenants”. This reference is not related to the modern law of landlord and tenant. |
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| In most cases involving multiple owners, there are only two owners. They hold the property only for themselves. Those two people hold the property in one of two ways: either as 'joint tenants' or as 'tenants in common'. |
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| The difference in law |
| In a Joint Tenancy, the two co-owners own all the property together. You can think of the property as something that cannot be cut down the middle or otherwise divided up. |
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| In a tenancy in common, there is an agreed division of ownership. This time think of the property as something that can be sliced up like a cake. You can have any number of slices and any number of beneficial owners. So only four people can be legal owners, but fifty people could be beneficial owners of shares in any proportion. Let us now apply that to the commonest situation: house ownership. |
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| Two people want to buy a house together. They want to own it “together” regardless of where the purchase money comes from or who pays the mortgage. They will most likely choose to be joint tenants. |
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| Now suppose three friends decide to buy a house together. They are not related, just friends. Each wants to keep his share. They decide to split the ownership pro rata with their contributions to the total purchase price. As it happens that works out at 46%, 28% and 26%. If they want to own different shares (rather than a third each), they must be tenants in common. However, even if they each owned the same percentage share, they would still probably choose to be tenants in common so as to have total control of their personal share of money. |
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| In a joint tenancy, regardless of the proportions in which the parties have actually contributed to the purchase price, and/or to the maintenance of the property or mortgage, the only safe working assumption is that any proceeds of sale will be divided equally. |
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| The difference in practice: death |
| On the death of one of two joint tenants, the share of that person passes automatically to the other of them. In law, that share is not part of the estate of the deceased. Of course, HMR&C still get their “share” as the change of ownership is treated as a disposition for the purpose of calculating inheritance tax. There is an exemption for the passing of ownership was between married people, when no tax would be payable. If between any others, tax will be payable. But this article is not about tax. |
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| On the other hand, when one of two or more tenants in common dies, his share is treated as part of his estate. It stays his. (The spouse exemption for inheritance tax still applies) |
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| The difference in practice: separation or divorce |
| If you are in any type of relationship, if you buy property in just one of the partner’s names, it remains that person's property on separation. The only exception to this rule is if the other party can establish that there was a common intention that they would be entitled to a share in the property. How do they do this? Here are a few examples: |
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| It may have been agreed in a simple conversation (proving it tends to be the problem!), or in writing between the parties at some time; |
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| If the other party has directly contributed to the purchase price the courts are likely to accept that at least part of the property should have been in their name; |
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| If there has been an "understanding" between the parties and the non-owner has acted to their detriment as a result (for example, contributed to mortgage repayments, paid household bills, or, perhaps, sold their own property) then the courts may agree they should share in the property. |
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| Be careful not to disinherit your children |
| Parties in an unmarried relationship also often use a joint tenancy as a way of holding the property. However, where people come to a relationship with children by a first marriage, a joint tenancy can disinherit the children of the spouse who dies first. His or her interest will pass straight to the survivor, and the children will then be dependent upon gifts made by the surviving spouse (who may again remarry). |
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| Of course the easiest way to prove any of this is to use a legal agreement. |
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| Make a will |
| For tenants in common it is also sensible both to make wills, and be clear about the precise agreement between the owners on such matters as the proportions in which the property is owned, who can live in the house, who decides when the property is to be sold, and so on. The agreement is then best recorded in a formal trust deed. |
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| How do you know whether you are a joint tenant or a tenant in common? |
| Check your title at the Land Registry. First obtain the title number from your solicitor. The proprietorship register of your land certificate will show the names of owners and, if you are tenants in common will also have the wording "No disposition by a sole proprietor of the registered estate (except a trust corporation) under which capital money arises is to be registered unless authorised by an order of the court". If there is no such wording in the title document then you are almost certainly a joint tenant. |
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| Changing from joint tenancy to tenants in common |
| By “severing” the joint tenancy, you become tenants in common, each with his or her separate share in the property with which they can do with as they like. Note that a tenancy in common cannot be changed to a joint tenancy except by a formal deed of gift. |
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| All that is required to sever a joint tenancy and so create a tenancy in common is for one party to write to the other in the terms: |
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| I hereby server our joint tenancy in the property known as [address]. This takes effect immediately. |
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| It is obviously important that you can prove the other party received the communication. |
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| Once the tenancy has been severed you should copy the letter to the Land Registry (assuming the Property is registered) asking them formally to note the severance on the register. At the time of writing no fee is payable for this application. |
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| The breaking of a joint tenancy is also a good time to consider making a new will, for the reasons outlined above. |
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| Joint tenancy and tenants in common |
| To help you with the issues raised in this article, Net Lawman sells: |
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| Co-ownership agreement: tenants in common |
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| Wills |
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| Shared purchase agreement: residential property betwen two owners |
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| Shared purchase agreement: residential property between three or more owners |
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| Shared purchase agreement: holiday house between two owners |
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