When it comes to owning property with someone else, whether it's your spouse, family member, or business partner, it's important to understand the different legal arrangements available to you.
Joint tenancy and tenants in common are two common ways of jointly holding property in the UK. Each comes with its own set of rules and implications that can significantly impact your rights and responsibilities as a property owner.
In this article, we'll look into the key differences between joint tenants and tenants in common, exploring what each arrangement entails and helping you determine which option may better suit your needs.
What are joint tenants?
Joint tenants refer to two or more people who share equal ownership rights in a property. That is, each person essentially owns the entire property collectively with the other joint tenants.
Under joint tenancy, all owners enjoy equal rights and interests in the property.
In the unfortunate event of one joint tenant's death, the remaining owners automatically inherit the deceased tenant's share through what is known as the 'right of survivorship.' This legal principle makes sure that the property seamlessly transfers to the surviving joint tenants without being subject to the deceased owner's estate.
For example, in the case of a married couple owning a home as joint tenants, if one spouse passes away, the surviving spouse automatically becomes the sole owner of the property, simplifying inheritance matters and avoiding the complexities often associated with probate.
What are tenants in common?
In contrast to joint tenants, tenants in common offer a different approach to property ownership, allowing multiple individuals to hold a portion of a property together. In a tenancy in common agreement, each tenant in common owns a specific share of the property, which can either be equal or unequal based on their agreement. For example, one owner may have a 60% share of a property, while the other owns 40%.
Unlike joint tenancy, where the aforementioned right of survivorship dictates that a deceased owner's share automatically transfers to the surviving owners, tenants in common operate differently. Instead, in the event of the death of a tenant in common, their share does not automatically pass to the remaining owners. Instead, it is distributed according to the instructions in their will or by the rules of intestacy. This means that tenants in common get to choose who will inherit their share of the property.
It's also common for tenants in common to draft deeds of trust. This is a formal and legally binding document that outlines the share of ownership of the property. It can also look into financial responsiblites and what happens if the property is sold. Still not sure? Head to our guide on what is a deed of trust in the UK.
Key differences between joint tenants and tenants in common
As can be seen above, there are key differences between joint tenants and tenants in common.
1. Ownership structure
Joint tenants always hold equal shares of a property, whereas tenants in common may have varying ownership shares, which are agreed between them when purchasing a property and written into a legally binding agreement.
2. Right of Survivorship
Joint tenants have the right of survivorship, meaning when one joint tenant dies, the surviving joint tenants automatically inherit the deceased tenant's share.
Conversely, tenants in common do not have the right of survivorship. Instead, when a tenant in common passes away, their share is distributed according to their will or intestacy law, instead of automatically transferring to the remaining owners.
3. Selling or transferring shares
Joint tenants must get unanimous consent from all owners to sell or transfer their share of the property.
In contrast, tenants in common have the freedom to sell or transfer their portion without needing approval from other owners.
4. Debts and claims
For joint tenants, creditors cannot seize an individual's share of the property to settle their debts.
However, in tenants in common arrangements, creditors may pursue the debtor's portion of the property if necessary.
Tenants in common vs joint tenants
When it comes to choosing between tenants in common and joint tenants, it's important to consider your circumstances and preferences. The best way to understand which option may be right for you is to speak with a property solicitor who can advise you of your options and help you make an informed decision.
Here's a breakdown of things you might want to consider:
Benefits of joint tenancy
Joint tenancy offers a straightforward way to make sure that your share of the property automatically transfers to the other co-owner(s) upon your death;
It is a good idea if you prefer equal shares and would like to bypass the hassle of probate applications and inheritance tax when it comes to your property;
It is a simple and efficient method to keep the property in the hands of the original owners while one, or both, are still alive.
Benefits of tenants in common
Tenants in common agreements may be preferable if you have specific wishes about who inherits your share of the property. For example, a child from a previous relationship;
This arrangement allows for diverse ownership interests, considering each owner's financial contributions;
It offers more flexibility in terms of ownership shares and inheritance arrangements.
Can you switch from joint tenants to tenants in common?
It is possible to switch from joint tenants to tenants in common. The process involves legal procedures and requires the consent of all property owners involved.
To convert joint ownership into tenancy in common, you must start a formal process known as a 'notice of severance.' This notice serves as an indication of the intention to sever the joint tenancy and change it into a tenancy in common agreement. Once severed, each owner holds a distinct portion of the property, which may be unequal based on their agreement.
Above all else, property owners who do decide to convert to a tenancy in common agreement should prioritise making a will soon after severing a joint tenancy to ensure that their share of the property is distributed according to their wishes.
A solicitor can help with both the notice of severance process in terms of property ownership and making a will. To get help with either, or both matters, quickly and on a fixed-fee basis, contact our legal assessment team today.
Recap: Tenants in common vs Joint tenants compared
Feature | Tenants in Common | Joint Tenants |
|---|---|---|
Ownership shares | Each owner can hold an unequal share | All owners have an equal share of the property |
Rights of survivorship | No automatic transfer of ownership upon death | Automatic transfer of ownership to the surviving owner(s) upon death |
Will requirement | Essential to have a will to determine who inherits the deceased owner’s share | A will does not affect ownership, as rights of survivorship take precedence |
Flexibility in ownership | Allows flexibility to define ownership shares based on contributions or agreement | Does not allow division of ownership shares - ownership is always equal |
Selling ownership | An owner can sell or transfer their share independently without the consent of others (subject to terms) | Selling or transferring ownership requires the agreement of all co-owners |
References
Joint property ownership from Gov.UK