Navigating property ownership can be complex, especially when deciding between joint tenants and tenants in common. Both ownership forms have distinct advantages and drawbacks, and the best choice often depends on individual circumstances and plans. This opinion piece aims to shed light on both forms and empower you with the knowledge to make an informed decision.

What is Joint Tenants?

Buying a property as joint tenants means both parties have equal shares and rights to the whole property. For instance, if you and your spouse buy a house as joint tenants, you own 100% of the property. This egalitarian approach disregards individual contributions to the deposit or monthly repayments, and each tenant is entitled to 50% of the sale proceeds when the property is sold. In the event of one tenant’s death, the property automatically transfers to the surviving tenant, bypassing any will or estate planning.

Pros and Cons of Joint Tenancy

Pros:

• Simplicity: Joint tenancy is straightforward, with equal rights for all owners.
• Inheritance: There’s no need to draft a will for the property; it automatically passes to the surviving tenant.
• Suitability for Couples: Ideal for couples who want their partner to inherit their share without legal hassles.
• Lower Legal Fees: Generally involves less documentation and lower legal fees.

Cons:

• Equal Split: Sale proceeds are split 50/50, regardless of individual contributions.
• Unanimous Agreement Required: All parties must agree to sell the property.
• No Will Provision: You can’t pass your share to someone else in your will.
• No Deed of Trust: You can’t use a deed of trust to separate individual shares.

What is Tenancy in Common?

Tenancy in common allows for different ownership shares, offering a level of flexibility and adaptability that can be reassuring. For example, if one person contributes 75% of the deposit and makes 75% of the repayments, they can hold 75% of the property. This form is popular for friends buying together or parents helping children get on the property ladder. Unlike joint tenancy, you can leave your share to anyone in your will, and ownership shares can be updated over time.

Pros and Cons of Tenancy in Common

Pros:

• Individual Ownership: Each tenant owns their specific share of the property.
• Will Flexibility: You can leave your share to whomever you choose in your will.
• Equal Rights: All owners have equal rights, regardless of share size.
• Deed of Trust: A deed of trust can outline what happens if one owner wants to sell.
• Tax Efficiency: Owning unequal shares can be more tax-efficient.

Cons:

• Deed of Trust Costs: Creating a deed of trust can be expensive.
• Will Requirement: A will is necessary to confirm who inherits your share.
• Sale of Share: Other owners can sell their share without your approval.
• Form 17 Requirement: Required if you receive rental income from the property.

Differences Between Joint Tenancy and Tenancy in Common

Property Ownership

• Joint Tenancy: Equal share for all tenants, even split of sale proceeds.
• Tenancy in Common: Flexible ownership shares, such as 60/40 or 75/25.

Inheritance After Death

• Joint Tenancy: Automatically passes to surviving tenants, not part of the estate.
• Tenancy in Common: Part of the estate can be passed on via will.

Mortgage

• Joint Tenancy: Requires a joint mortgage, up to four borrowers.
• Tenancy in Common: It is possible to have individual mortgages, though rare.

Inheritance Tax

• Joint Tenancy: No inheritance tax as property passes automatically.
• Tenancy in Common: Part of the estate, subject to inheritance tax.

Switching Ownership Types

Changing Joint Tenancy to Tenancy in Common

Known as ‘severance of joint tenancy,’ this process requires a Form A restriction application, which a solicitor can manage. If other owners have yet to agree to the change, written notice must be given. This process can be complex and involve legal fees, so it’s essential to consider this before making any changes to your property ownership.

Changing Tenancy in Common to Joint Tenancy

All owners must agree to this switch. A new trust deed and a cancellation of any existing restrictions are required, usually involving a conveyance.

Which Option Is Right for You?

The choice between joint tenancy and tenancy in common depends on your relationship with co-owners, financial contributions, and future plans. Here are some guidelines:

Joint Tenancy:

• Ideal for long-term couples or married partners.
• Suitable for those wanting automatic inheritance for the surviving tenant.
• Best for equal ownership and shared proceeds.

Tenancy in Common:

• Suitable for friends or unequal financial contributors.
• Ideal for those wanting to leave their share to someone else.
• More flexible for updating ownership shares.

Conclusion

Both joint tenancy and tenancy in common offer unique benefits and drawbacks. Understanding the differences between the two options is essential to make the right choice. Consider who you want to leave your property to after you die and how you would divide any future sale proceeds. If you need more clarification, it’s always wise to seek legal advice to fully grasp the implications of each option and feel confident in your decision. Balancing both forms of property ownership can lead to a harmonious and financially sound investment.

For more detailed guidance, speak to a solicitor or conveyancer who can help you understand the legal implications and make the right choice for your property purchase.