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Co-ownership of Property

Odyssey January 2017

...and Life-time Planning

Most of us will co-own property at some point in our lifetimes whether it’s purchasing our first property with a spouse or partner, or entering into a property business with a business partner or friend. As there is more than one way to hold property as a co-owner, either as joint tenants or tenants in common, the best option will depend on your individual circumstances and future plans for your finances.

What is a joint tenant?

All co-owners or ‘tenants’ are equally entitled to the whole of the property. On the death of one co-owner, that co-owner’s interest in the property will automatically pass to the surviving co-owner(s) by law. This is known as the right of survivorship. Importantly, this means that the interest in the property of a co-owner holding as joint tenant will not pass under their Will unless they are the last co-owner to die and have become the sole owner. It is common for spouses to hold as joint tenants as they often have similar Will provisions and want their estate to pass to their spouse in the first instance.

It is important to remember if joint tenants die together there is a presumption that the older of the two died first which means the property passes to the estate of the younger one. To prevent the problems this can cause a Will and holding the property as tenants in common is recommended.

What is a tenant in common?

Each co-owner has a distinct beneficial share in the property. Each share is usually expressed in terms of a percentage which should be documented in a declaration of trust so that the intentions of the co-owners is clear and not left to be implied from the circumstances and/or financial contributions made. As each tenant in common owns a distinct beneficial share of the property, each tenant in common can sell their share without the consent of the other.

What if I already own property?

If you are not married and do not have a Will but want the property to go automatically to your other co-owner, perhaps because you cohabit with them, joint tenants may be preferable to benefit from the right of survivorship. This means that your share of the property will pass to them automatically. Your other assets will pass by your Will, or if none, the rules of intestacy which favour relatives.

If you hold as joint tenants but wish your property to pass under the terms of your Will, you will need to sever the joint tenancy so that you hold as tenants in common. This is done by a written note of severance. Equally, if you wish each co-owner to have a distinct share which reflects the sum of money put into the property, you will need to hold as tenants in common.

A declaration of trust is a highly useful way of documenting any agreement between co-owners to avoid future disputes. The declaration of trust should confirm the extent of each co-owner’s beneficial interest and set out any express terms that the co-owners wish to include such as practical arrangements for day-to-day issues like maintenance and other expenses or where a party wishes to sell.

In addition to a declaration of trust, an application would need to be made to the Land Registry to update the title to the property, if registered, to show that it is held as tenants in common.

Melissa de Carvalho is a trainee solicitor in the Estates and Financial Planning Department.  For help on this, or for further information based on your individual circumstances, please do contact Melissa, or a member of the Estates or Residential Property team on 01473 232121.

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