What is the difference between joint tenants and tenants in common?
9 May 2018 by Donna Duca
When owning a property jointly, you will need to decide how you wish to hold the legal title either Joint Tenants or Tenants in Common.
- Joint Tenants – if one person dies that person’s share will automatically pass to the surviving legal owner.
- Tenants in Common – if one person dies, that person’s share does not automatically pass to the surviving legal owner.
The first method known as “joint tenants” is often used by married couples or registered civil partners, and sometimes cohabiting couples. When one of them dies (unless the tenancy has, before death, been severed i.e converted to Tenants in Common) the surviving legal owner automatically becomes the sole legal owner of the whole property. The property will not pass under their Will or Rules of Intestacy of the person who has died. It is also presumed that the parties’ interests in the property are equal even if the parties contributed unequally.
It is possible for either joint tenant to “sever” a joint tenancy at any time and this would have the effect of converting it into a tenants in common (see below)
Sometimes holding as joint tenants may not be suited to married couples where one or both of the buyers are individually wealthy and where the equalisation of estates for Inheritance Tax purposes is a consideration.
The second method is known as “tenants in common” it is usually used by business partners and also married couples especially for Inheritance Tax Planning and in some cases unmarried couples.
This means that if one of you dies (say party A) his/her share will not automatically pass to the survivor (say Party B) unlike joint tenants above. Party A’s share would become part of his/her estate and will pass in accordance with his/her Will or under the Rules of Intestacy. It also means that Party A’s estate could call upon Party B to sell the property or buy out Party A’s interest in the property even if Party B still needed to live there. When the property is sold the net sale proceeds would need to be divided amongst the owners. This option should also be used if you want to expand on the terms upon which you own the property. These wishes may need to be incorporated in a Trust Deed which your Solicitor/Licensed Conveyancer should be able to assist with.
It should be stressed that the stated share is not a share in the property itself, but is reflected in the sale proceeds when the property is ultimately sold. It should be noted you should reconsider your position whenever your financial circumstances change and if that change might have a bearing on your respective shares.
Importantly, whatever shares you have, you will each be liable to your mortgage lender for the full amount of any mortgage debt secured on the property. This is known as joint and several liability.
When purchasing a property, it is important to be sure of the difference between becoming joint tenants and tenants in common. Our friendly conveyancing team are here to help you, call 01206 704043 or email [email protected].