Buying a new home is a very exciting time, especially if you are jointly purchasing it with that someone special. That feeling of moving into your new home, sharing great moments together and simply just having somewhere that is yours, is incomparable, but there are some legal aspects that need considering which your conveyancer will need to discuss with you. One of the more important aspects that you will need to consider and make a decision on, is whether you will be joint tenants or tenants in common. The decision you make here will have far reaching implications for inheritance purposes or if you should separate from your partner, so it needs careful consideration. In this article, we will look more closely at what the two terms mean and their implications. Please note that this article is purely for information purposes only and should not be construed as any form of legal advice.
The first thing to note is that the word tenants does not refer to those renting a property, which is where the word tenant would typically be used. In this context, it is a legal phrase relating to those who own a share in a property and refers to the type of ownership.
According to the legal advice firm Progeny joint tenants are where both partners jointly own the property with neither of them owning a fixed percentage. On the one hand this might seem like the best way to go when buying a new property together as it gives the impression that your home truly belongs to both of you in every sense. There are restrictions with this type of ownership and that comes when one of the partners die or, in the unfortunate event, the relationship breaks down.
In the event of one of the partners passing away with the other surviving, the entire property is inherited by the survivor automatically. There is no option, with this type of ownership, for either party to bequeath any share of the property in a Will. This is called the right of survivorship according to Co-op legal services. It is important to note, here, that even if the joint owner who has passed away, has a Will which passes a share of the property on to a child for example, this does not supersede the joint tenancy agreement and the terms of the will are essentially nullified. Put simply, this is because the joint owner does not have a quantifiable share in the property which can be passed on as both essentially own 100%. It is also important to understand that, in the case of Joint tenancy, there is no need for a Grant of Probate or a Grant of letters of Administration for the property to be transferred into sole ownership of the survivor.
In the event of a relationship breakdown and the property being sold both parties need to agree to the sale and the transfer needs to be signed by both parties according to solicitors Bonnets. If agreement cannot be made about selling the property there are usually only 2 options: One party stays in the property upon buying out the 50% share the other party has, i.e. becomes 100% owner; a court order is obtained for the sale. It is important to note that, in either of these cases, both parties are entitled to 50% of the property. So, if one stays they have to pay the other the full 50% share and if the property is sold both parties are entitled to exactly 50% of the sale proceeds.
In a lot of respects Joint tenants is a much simpler situation as there are really only two people involved, but it does have its restrictions.
Tenants in Common
The biggest difference between tenants in common and joint tenants is that is it specific in how much of a property each party owns and should one of the parties pass away, that portion does not automatically go to the survivor. Instead, it forms part of the deceased person’s estate and can be passed on to others through a will. If there is no will then then it will be distributed according to standard intestacy laws. There is no requirement for the shares in the property to be split 50:50 and this can be set at the time of purchase to specify how much each party owns of the property which should be clearly documented in the transfer deed.
Where a couple decide to be tenants in common it is very important that they draw up a will to avoid confusion for those inheriting.
One thing to consider with being tenants in common is having a declaration of trust drawn up. This is a legally binding document, agreed when buying a property which very clearly states who owns how much of the property and how much they are entitled to should the property be sold. It is important to understand here, that people who are not married do not have the same protections as those who have a legally recognised relationship. A declaration of trust will reduce any confusion in the future.
Just because you made a decision when you purchased your property together, does not mean that you are beholden to that decision for life and the ownership type can be changed.
A joint tenancy can be severed and this does not require both parties to agree. In this case, should one of the parties in a joint tenancy decide that they do not want their share to automatically pass to their partner for whatever reason, the joint tenancy can be severed and then the property becomes a tenancy in common with equal shares. This is essentially the same process if both parties agree to change the ownership type.
It is also possible to change from a tenancy in common to a joint tenancy but this is less common and more complex according to SAM conveyancing, especially is there is a declaration of trust in place. The simple advice here is to employ the services of a legal professional to assist with the process.
Changing a joint tenancy to a tenancy in common is a much simpler process, but in either case, professional legal advice should be sought.
Buying a new home is an exciting prospect but not without its legal complexities and you will, if buying a property with a partner need to decide whether you want to be joint tenants or tenants in common. Both have their pros and cons and you should consult a solicitor before making the decision. The most important thing, however, is to make the decision that is right for your circumstance and then get on with enjoying your new home with your loved one.