Joint tenants or tenants in common – Which is the best choice when buying a property with someone else?
If you’re buying a property with someone else, your conveyancing solicitor will ask you whether you want to register the property as ‘Joint Tenants’ or ‘Tenants in Common’.
Although they sound similar, they refer to distinctly different ways of owning and sharing a property. Making the right choice can have profound implications on your ownership rights, obligations, tax, and estate planning.
The following article explains the differences between the two types of property ownership, and which type is right for you.
Joint Tenants
When you own a property as joint tenants, up to 4 individuals own the entire property equally and no individual owns a quantifiable share. Although it can sound counterintuitive, this means that each individual owns a 100% stake in the property.
As joint tenants you will need to take out a joint mortgage (if you need one), and when you decide to sell the property, you will all need to be in agreement.
If you decide to sell the property due to a divorce or separation, each joint tenant would receive an equal share of the sale proceeds, regardless of their contributions to the purchase price, upkeep and mortgage repayments.
One of the key features of joint tenancy is the 'right of survivorship'. Under this right, if one co-owner (joint tenant) dies, their interest in the property passes to the surviving co-owner(s), regardless of any will or other inheritance provisions.
If you are buying the property as a couple, the right of survivorship may be the deciding factor, as people typically want their home to pass to their spouse or partner with minimal inheritance complexities. Joint tenancy may also be best suited when buying with another family member.
If there is a significant difference between your initial contributions to the purchase prices, however, you matt decide that you want this to be reflected if you ultimately separate. In this case, you might want to consider tenancy in common.
If you are buying a property with friends or co-investors, right of survivorship may be the deciding factor, as you may want to leave your share in your property to your family.
Tenants in Common
Unlike joint tenants, tenants in common each own a specific, quantifiable share of the property, which can be equal or unequal.
Two tenants in common could each own equal 50% shares in a property, or they could own any combination of different sizes of share, e.g. 75% : 25%.
Similarly, three tenants in common could own equal 33% shares in a property, or they could own different sizes of share, e.g. 50% : 25% : 25%.
A tenant in common can sell their share in the property without the consent of the other owner(s), unless otherwise agreed in a Deed of Trust.
As a further option, you may wish to consider whether the document should contain a right of first refusal (right of pre-emption) in the event of one party wishing to dispose of their share in the property. This is called a 'right of pre-emption'.
If a tenant in common dies, there is no default right of survivorship, so their share in the property does not automatically pass to the surviving co-owner. Instead, the deceased person’s share will form part of their estate, and the share will be distributed in accordance with their will. If the deceased person did not make a will, the rules of intestacy will apply.
Income received from the property
If you purchased the property as an investment or if you subsequently decide to rent it out, income tax will be payable on the income received.
If the property is owned by joint tenants, then HMRC will assume that the income received is split into equal shares.
Investment or buy to let properties are usually purchased as a tenancy in common. HMRC will still assume that the property is held in equal shares, unless you tell them otherwise.
To inform HMRC that you hold unequal shares in the property, you will need to notify HMRC by completing Form 17. You will also need to send them a copy of a Deed of Trust that details your percentage share in the property.
Find out more about buy to let conveyancing
Deed of Trust
A Deed of Trust is a legally binding document that outlines the financial arrangements between joint tenants of a property and specifies how ownership shares are divided.
This legal agreement can be particularly useful when individual parties contribute unequal amounts to the property's purchase or maintenance. It details each party's rights, responsibilities, and what should happen if, for example, property is sold or a relationship breaks down.
A Deed of Trust is a simple and cost-effective way to ensure that individual financial contributions and ownership rights are clear, fair and protected.
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Summary of differences between tenants in common and joint tenants
Joint tenant | Tenant in Common | |
---|---|---|
Ownership structure | Each owner has equal ownership of the entire property. | Each owner has a specific share, which can be equal or unequal. |
Best suited to married, civil partnership and long-term couples | Best suited to friends and co-investors | |
Simpler to set up | May incur added legal expense | |
What happened if a co-owner dies? | The property passes to the other owner(s) under the right of survivorship - even if you stipulate otherwise in your will | The property passes to your estate and is distributed as per your will |
What happens if the property is sold following a divorce or separation? | You each receive half of the sale proceeds | The sale proceeds are divided according to the individual shares (it is advisable to set this out in a Deed of Trust) |
What happens if one party wants to sell? | Both parties need to agree to the sale | Although sale still requires all parties to sign the transfer deed, it is advisable to agree the process if one or more parties want to sell in a Deed of Trust. |
Can I change an existing ownership structure?
When circumstances change, you many want to change or update the ownership structure to reflect those circumstances. Perhaps you want to sell your share, buy out a joint owner, add a new partner to the deeds, or gift your share in the property to a family member?
It is usually a relatively straightforward legal process to change or update the property title held at HM Land Registry.
Changing a joint tenancy
A 'transfer of equity' is when an existing owner of a property (or land) adds or removes one or more people to the title (ownership) of the property, or transfers full ownership of the property to another person.
If, for example, one party decides to sell their share to an existing or new owner, this transfer of equity would need to be recorded at HM Land Registry.
The transfer of equity process will need to be carried out by a conveyancing solicitor who will work closely with all parties involved in the legal transfer, including the mortgage lender (if applicable).
Changing from tenants in common to joint tenants
It may be, for example, that you bought a property as partners and subsequently got married or entered into a civil partnership.
Changing the tenancy to a joint tenancy can be a relatively straightforward process, but it is recommended that you ask a conveyancing solicitor to complete the process for you. A solicitor will complete or update a trust deed, handle any legal formalities with the mortgage lender to and register the new ownership structure at HM Land Registry.
Changing from joint tenants to tenants in common
You can also change a joint tenancy to tenants in common by implementing a 'severance of joint tenancy'. This is a legal document that will convert the joint tenancy into a tenancy in common. It is recommended that you ask a conveyancing solicitor to complete the process for you.