Buying a property with a partner is a hugely exciting time, but can be daunting, particularly if you are first-time buyers.
There are two ways to own a property with another person. The first option is as joint tenants, and the second is as tenants in common.
Before you commit to a property purchase, it is crucial to understand how the two forms of property ownership structure differ so you choose the right option.
In this article, our experienced Property Solicitors look at some key differences between a joint tenancy and a tenancy in common.
What is a joint tenancy?
Buying a property as joint tenants means you both own the property equally and have equal rights to it, irrespective of how much you each contribute towards it.
For example, it doesn’t matter if one person has paid a higher share of the deposit or is contributing more towards the mortgage. As joint tenants, your ownership is equal.
If one of you dies, the property will automatically pass to the surviving joint tenant(s) regardless of the terms of any Will, and if you sell the property, each owner is entitled to half of the sale proceeds.
Joint tenancies are generally preferred by married couples and those in other committed relationships.
What are tenants in common?
Buying a property as tenants in common means you each hold the property in different shares. The property does not automatically pass to the other owners if you die, and you can pass on your share of the property in your Will.
Owners decide what share of the property they each own, for example, whether it is a 50-50 split or unequal percentages of ownership, such as 80/20 or 60/40.
A tenancy in common is most usually used by friends or family members who are buying a property together who make unequal contributions towards the purchase price and mortgage payments and want the ownership structure to reflect that.
It is also commonly used when one or both purchasers have children from a previous relationship, and they wish to preserve their share of the house for those children. If a joint tenancy is chosen, the share will automatically pass to the surviving owner and bypass the deceased’s children, effectively disinheriting them.
Each owner receives their respective share of the proceeds when the property is sold.
If you buy a property as tenants in common, you can have up to four named legal owners.
Buying as tenants in common can be more complicated than buying as joint tenants, and many people choose to draw up a declaration of trust for additional protection.
Can you change a property from a joint tenancy to a tenancy in common?
Yes. Joint owners of property can change their ownership from joint tenants to tenants in common at any time and with, or without, mutual consent. However, you can’t change from tenants in common to joint tenants without re-transferring the property back to yourselves with the agreement of all owners. Therefore, it is important to make the correct choice when you make the initial purchase.
Either of you can sever the joint tenancy by giving written notice to the other. The property is then held by both of you as tenants in common, and your separate shares can then be left by Will. When you sever a joint tenancy, you should also consider whether you need to update your Will at the same time.
If you are buying a property as joint tenants, or tenants in common, or need to make a transfer of ownership application, Onions & Davies can help.
We ensure a fair and secure co-ownership agreement if you are buying or selling property with other parties or changing the ownership structure of your property.
For more information, or to speak to one of our property solicitors, call 01630 652 405 or make an online enquiry.
What are the inheritance tax implications of buying a property as joint tenants or tenants in common?
If you were joint tenants, you automatically inherit the deceased’s share of any property you owned together as joint tenants. You may have to pay inheritance tax if the whole of the deceased’s assets are worth more than the inheritance tax threshold of £325,000 and the deceased’s estate does not pay.
If you owned a property as tenants in common, and the deceased left you their share, you may have to pay inheritance tax on the deceased’s share of the property if the whole of their assets is worth more than the inheritance tax threshold of £325,000 and the estate does not pay the tax.
Read more here.
Is a joint tenancy or a tenancy in common better?
Joint tenancies and tenancies in common both have their advantages and disadvantages. When considering buying a property with another person or other people, you should weigh up both options and decide which is most appropriate for your circumstances.
If you are buying a property with your partner, you might think the right fit is as joint tenants. However, if you are contributing significantly more financially to the purchase, buying as tenants in common may be the better option.
An experienced residential conveyancing solicitor can help advise on the pros and cons of each form of property ownership and advise on what is best for you.
Property Solicitor Shropshire, Cheshire and Staffordshire
Buying a property is one of the most important legal transactions you undertake. Therefore, ensuring that the legal advice you receive is accurate and relevant to your situation is crucial.
At Onions & Davies, we have many years of experience advising people on the best way to hold their property. We will advise you whenever you buy a property through us and in other circumstances, such as when you are making a Will or getting divorced.
Onions & Davies has provided exceptional property law services in Shropshire, Cheshire, Staffordshire, and beyond for decades.
Our highly skilled property team utilises in-depth local knowledge and expertise to navigate potential legal complexities, ensuring a smooth and successful transaction tailored to your circumstances.
To speak to one of our conveyancing solicitors, please call us on 01630 652 405 or use our online contact form.
For more information about how we can help you buy or sell a property, please click here.