Tenants in common vs joint tenants: what does it mean and why does it matter on separation?
When couples buy a property together, one of the questions they will be asked is how they would like to own it. Most people answer quickly, often without fully understanding the implications, and then move on to the next item on the list. At the time, it can feel like a legal detail. But later, it can turn out to be one of the most significant decisions the couple made.
The two options are joint tenancy and tenancy in common. These are not different types of tenancy in the ordinary sense of renting a property. They are legal descriptions of the way in which two or more people own a property together, and the difference between them can have real consequences for what happens to that property on separation and on death.
We are asked about this regularly by clients going through separation, often by people who are not entirely sure which arrangement they have in place, nor what it means for them now.
In a joint tenancy, both owners hold the property together as a single, unified ownership. There are no separate shares.
A significant feature of a joint tenancy is known as the right of survivorship. This means that if one owner dies, their interest in the property passes automatically to the surviving joint tenant, regardless of what their Will says.
This makes joint tenancy a natural choice for many couples who buy together and want the property to pass to the other on death. During the course of a relationship, most couples give it little thought. It is only when circumstances change that the implications become important.
Tenants in common is a different form of shared ownership in which each owner holds a defined, separate share in the property. Those shares can be equal, but they do not have to be. One owner might hold 60% and the other 40%, or they might hold entirely different proportions, depending on what was agreed when the property was purchased or at some later point.
A key distinction from a joint tenancy is that there is no right of survivorship in a tenancy in common. In the event of one owner’s death, their share passes in accordance with their Will, or if they have no Will, under the rules of intestacy. It does not automatically pass to the other owner.
This means that where a property is owned as tenants in common, an owner can leave their share of the property to whoever they choose, their partner, a child, a family member, a charity. Their share is theirs to dispose of as they wish. It also means, however, that their co-owner could potentially leave their share to someone entirely unconnected with them, which can create significant complications, particularly where the property is a family home.
The most important practical differences between joint tenancy and tenancy in common are:
Where a lawyer is instructed, a joint tenancy will often be severed which automatically creates a tenancy in common (in equal shares).
In a tenancy in common, each owner already holds a defined share.
How the ownership of a property is then addressed will be entirely different depending upon whether the couple are married/in a civil partnership or unmarried/not in a civil partnership.
For married couples (and those in a civil partnership), the court has wide powers to redistribute assets on divorce, including the family home, in whatever way it considers fair in all the circumstances.
For unmarried couples (or those not in a civil partnership), the court does not have the same redistributive powers. Where an express declaration of trust exists (which is addressed later) this is usually binding absent fraud, duress, undue influence or a subsequent agreement.
Severing a joint tenancy is the process by which a joint tenancy is converted into a tenancy in common. Once severed, each owner holds a defined share, the right of survivorship no longer applies, and each party can deal with their share independently.
The process is relatively straightforward from a technical point of view. A notice of severance is served on the other joint tenant, and a restriction is registered at HM Land Registry to record the change. The shares are equal unless there is an agreement to the contrary.
Where people own a property as tenants in common, it is important for that agreement to be properly recorded. This is usually done through a declaration of trust.
A declaration of trust is a legally binding declaration that can be used to set out each owner’s share of the property.
We see a significant number of cases where people have purchased property together, made unequal contributions, and assumed that their larger contribution would be recognised if the property were ever sold. Without a declaration of trust in place, that assumption is not always borne out by the legal position. The absence of a properly documented agreement can leave one party in a significantly different financial position to that which they had anticipated.
A declaration of trust is not only relevant at the point of purchase. It can also be put in place or varied at a later stage.
No, and in our experience, court should be the last resort rather than the starting point.
The legal framework that will apply is very different depending upon whether the couple are married/civil partners or unmarried/not civil partners, but in both instances there are a range of options that are available to avoid court.
Whether you are purchasing a property or are already owners, we can help you to ensure you have the right arrangements in place.
Questions about property ownership often feel technical, but their consequences are anything but. Getting the right advice at the right time can make a real difference.
At Family Law Partners, we take the time to understand your situation fully before making recommendations.
If you would like to speak with a member of our team, please get in touch.
Chris Maulkin is a Director, Solicitor & Collaborative Lawyer in our Brighton Office and is a member of Resolution.