Tenants or homeowners – get the details right at the start

25th July 2019

Picture this… Janet and John skip excitedly into their solicitor’s office one day to begin the process of buying their first house. From the other side of the desk comes the immortal question, hallowed in legal circles: “Do you want to own the property as joint tenants or tenants in common?”

“We just want to own it,” they reply – and then a great deal of explanation needs to follow.

If you have already been asked what may seem like a silly question, you will know that all is not as it seems – the decision you are being asked to make is one with very real consequences.

In simple terms, the legal title to the property will always be in the names of the legal owners i.e. Janet and John. But the beneficial ownership, i.e. who is entitled to the proceeds of sale (the actual monetary value), can be held in one of two ways.

If you opt to hold the beneficial interest as tenants in common, which is often the case for unmarried couples or friends, you own identifiable shares in the property. These can be equal or unequal shares. The title to the property will make reference to this, but it will not state the shares, as the actual split between the parties is a private arrangement. This arrangement is usually set out in a deed of trust to record the agreement between the parties. Your solicitor can arrange this as part of the conveyancing process, although there will almost always be a separate charge for this.

If you opt to hold the beneficial interest as joint tenants, which is often the case for a husband and wife or civil partners, then you own the whole property together, regardless of how you paid for it, and there is never any need to have a separate document explaining that.

BUT there is an even more important distinction, and that is what happens to the property when one of the owners dies.

In the case of joint tenants, the property automatically passes to the surviving owner, regardless of whether you want it to. In the case of divorcing couples, this is often not the case, and you might be advised at the beginning of separation to ensure your wishes are reflected via a formal legal document called a ‘notice of severance’.

The effect of severing the joint tenancy is that the property is then owned as tenants in common; each owner’s share will pass to whomever they specify in their will, or be governed by the intestacy rules if they die without making a will.

In short, there are two questions you may want to ask yourselves:-

• Should we record that the property is owned in unequal shares?
• Who do we each wish to give our share to when we die?

Once done Janet and John can look forward to moving in day.

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