When purchasing a property with another person, one of the most important decisions you will make is how the beneficial interest in the property will be held. In England and Wales, where property is bought in more than one name, the legal title is held jointly but the beneficial interest will usually be held either as joint tenants or tenants in common.
The distinction between the two is significant and can have long-term implications for inheritance, financial contributions and the future sale of the property.
What is Joint Ownership?
Joint ownership arises where two or more people own property together, for example spouses, partners, relatives or friends.
When acting for purchasers of a property, the team at O’Donnell Solicitors will ask the buyers how they wish to hold the beneficial interest in the property. The choice between joint tenants and tenants in common determines what happens to your interest in the property during your lifetime and on death.
What are Joint Tenants?
If the property is held as joint tenants, the co-owners own the beneficial interest together as a single unified interest, rather than in separate defined shares.
The key feature of joint tenancy is the “right of survivorship”. This means that if one joint tenant dies, their beneficial interest in the property automatically passes to the surviving joint tenant(s) by survivorship and does not pass under the deceased’s will or intestacy.
When is this suitable?
Joint tenancy is often chosen by married couples, long-term partners or those who specifically want the property to pass automatically to the other owner.
It is a simple arrangement and works well where there is a high level of trust and shared financial commitment.
However, it may not be appropriate in all situations, particularly where contributions are unequal or where parties wish to have control over what happens to their interest on death.
What are Tenants in Common?
If you own a property as tenants in common, each owner holds a distinct beneficial share in the property. These shares can be equal or unequal depending on the parties’ intentions and agreement.
Unlike joint tenants, there is no right of survivorship. This means that on death, each owner’s share forms part of their estate and passes under their will or, if there is no will, under the rules of intestacy.
When is this suitable?
Tenants in common is often preferred where:
- Buyers contribute different amounts to the purchase price.
- Parties want to protect their individual investment.
- There are children from previous relationships.
- Owners want flexibility in estate planning.
In these situations, tenants in common provides greater control and clarity.
The Importance of a Declaration of Trust
Where co-owners are to hold unequal shares, or where contributions and intentions need to be recorded clearly, a Declaration of Trust is usually advisable.
This is a legal document that records:
- Each party’s beneficial share in the property.
- How sale proceeds should be divided.
- Contributions to mortgage payments or outgoings.
- The process to be followed if one party wishes to realise their interest or the property is to be sold.
A Declaration of Trust can help avoid disputes in the future, particularly if circumstances change. At O’Donnell Solicitors, we can assist property buyers with preparing a Declaration of Trust and ensuring it reflects the parties’ intentions.
Changing Ownership Arrangements
It is possible in some circumstances to change the way the beneficial interest is held after purchase. For example, co-owners who hold the beneficial interest as joint tenants can convert that beneficial ownership into a tenancy in common by a process known as severance.
This is often done where relationships change, financial circumstances evolve or parties wish to carry out estate planning.
It is also possible for co-owners to alter the beneficial ownership so that they hold as joint tenants rather than tenants in common. This usually requires all the beneficial owners to agree and the position to be properly documented.
Care should be taken to ensure the correct legal formalities are observed and Land Registry requirements are addressed.
How O’Donnell Solicitors can help
Choosing between joint tenants and tenants in common is not just a formality; it is a key legal decision that affects your rights during ownership and what happens to your property in the future.
Taking advice at the time of purchase can ensure your ownership structure aligns with your long-term intentions. At O’Donnell Solicitors, our property department can guide you through your options and work alongside our private client team who can assist with Declarations of Trust, estate planning and wills.
If you are looking to purchase a property with another person and are unsure which option would be right for you, our team is happy to help.
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