You may think there is only one way of owning a property, but as Stephens Scown’s Alison Nicholls explains, there are two distinctly different legal forms of ownership….
Admittedly it’s not something that people give very much thought to, but the way in which you own or ‘hold’ a property can make a big difference. Not only is it a good idea to give it careful consideration when you first buy the property, but also at regular intervals afterwards.
Legally there are two types of joint ownership, either as ‘joint tenants’ or as ‘tenants in common’ – there are pros and cons to each and it can apply to both freehold and leasehold properties.
‘Joint tenants’ is when the individuals share equal ownership and have the equal, undivided right to keep or dispose of the property. If the property is held as ‘joint tenants’ should one of the owners die, it automatically passes to the surviving partner, regardless of whether a will has been made leaving the deceased owner’s ‘share’ to someone else. It is common to find the family home held as ‘joint tenants’, but there can be very good reasons for it to be held otherwise.
An example might be an elderly couple who own the family home in this way. The wife dies and the property is passed to the husband in its entirety, regardless of the terms of a will. The husband then holds all of the assets, which could be subject to a claim for future care home fees etc. If the property had been held as ‘tenants in common’, the wife’s share of the assets would be protected.
Tenants in Common
This is where the ‘tenants in common’ each have a definite share in the property – for example, it could be that the couple own the property in equal shares or that one person owns a larger share than the other. However, the big difference is that if one of the owners dies, their share of the property would not automatically pass to the surviving owner; it would pass to whoever they specified in a will, or if a will is not made, in accordance with the rules of intestacy.
Take, for example, a married couple in their fifties, both with grown-up children from previous relationships. If they held the property as ‘joint tenants’ then on the first death the survivor would receive the whole property, potentially leaving the deceased’s children with nothing to inherit. This could be avoided if the property had been held as ‘tenants in common’ and each person had made wills leaving a life interest to the other; upon both deaths the property would then pass in accordance with both the original co-owners wills.
So which form of ownership should I go for?
‘Joint tenants’ is most common between married couples where there is no advantage to defining separate shares in a property and where they would want the property to automatically pass to the surviving spouse.
‘Tenants in common’ is often used for tax planning purposes or so one member of a couple can pass on their share to their children, while the other person can continue living there, passing on their half on death. It can prevent having to sell your home if you need to go into long-term care and it is also a way for couples who have put unequal deposits or money into a property to protect their share in case they split up.
It often comes down to personal choice and circumstances; however, it is always advisable to have a declaration of trust prepared when a property is held as ‘tenants in common’.
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