Legal Ownership of a Property.
When you buy property as more than one purchaser you need to decide how you intend to hold the legal ownership of the property between you.
Under English law property may be held in one of two ways – either as ‘Joint Tenants’ or ‘Tenants In Common’ and the Land Registry will note which choice you have made on the title documents for the property.
The differences between the two types of ownership are:-
When two people buy as Joint Tenants, upon the death of one, ownership of the property passes automatically to the other, who thus becomes the sole owner (called the right of survivorship). Whether or not the deceased Joint Tenant had a Will by which they sought to pass on their ownership to somebody else is irrelevant because the property passes outside the terms of a Will by the right of survivorship. Married couples and long-term partners will usually buy as Joint Tenants.
Tenants in Common
Parties buying as Tenants in Common decide upon the respective shares that they will have in the value of the property from the outset; this may, or may not, be an equal 50/50 split because it may need to reflect the relative contributions of the parties to the purchase price of the property – which may be unequal. For instance, one party may be paying the whole of the deposit from their own funds or be making a much larger contribution to any capital input towards the purchase price. If it is more complicated than a simple a 50/50 share we would advise that a Trust Deed should be prepared to lay out the allocation of the shares of each owner in the property. Such a Deed would attract an additional fee of £75 plus VAT.
There is no right of survivorship. If one Tenant in Common dies then their interest in the property does not pass to the other Tenant in Common but instead passes through the deceased Tenant in Common’s Will (or intestacy if they have no Will). Therefore, in certain circumstances, the death of one Tenant in Common will mean that the property has to be sold in order for his/her estate to be credited with his/her share in the property. In commercial relationships this can be taken account of but it may not be feasible in the case of private buyers; quite simply there may be insufficient funds available to the surviving Tenant in Common who may thus be forced to sell up and move. A Tenancy in Common may be appropriate, depending on individual circumstances, in purchases for business investment partners, by siblings, and for a couple where one or both have children from a previous relationship, so that their own blood children can be provided for by their parent. In all such cases we would recommend that the parties should ensure that they each have Wills dealing with the devolution of their ownership of the property. This is especially important for young couples just setting up home together who may feel that a Tenancy in Common meets their immediate needs, but wish to protect their partner in the event of disaster striking.
When choosing which form of ownership would be applicable to your particular purchase you should consider your personal circumstances and think about what you would want to happen to the property should you pass away.
If you require further legal advice with regard to a property you intend to purchase, or property that you already own then do not hesitate to contact on (0116) 2999 199, our Conveyancing Department who will be happy to discuss your options with you.