When purchasing a property jointly, there are two options for how the property can be held.
The first option is Joint Tenants and the second is Tenants in Common. Each of these has different implications for you and it is important to understand the difference.
Partners or family members who purchase property as joint tenants both own the whole of the property. They have equal rights to the whole property and the property automatically passes to the survivor upon the first death. You cannot leave a share of the property in your will.
Joint ownership is ideal for married couples or couples/family members who intend to leave the property to each other upon death. Neither owner holds a specific share of the property regardless of mortgage repayments or deposits.
After the first death as previously mentioned, the property passes to the surviving owner, and they can decide to dispose of it as they wish. This isn’t ideal for couples who have children from former relationships and may want to leave a share to them.
Tenants in Common
People who purchase properties as tenants in common own a specific agreed share of the property, which can be an equal 50/50 split or any other share to which they may agree.
Tenants in common in equal shares each hold a 50% share of the property and can dispose of their share as they wish e.g., to specific children or family members in their will.
Any individuals considering this option would therefore be advised to ensure they have Wills in place to reflect their wishes.
Tenants in common in unequal shares is ideal for couples or family members who will be making significantly different contributions to the property. For example, if one owner intends to contribute a larger sum of money towards the deposit or make most of the mortgage repayments.
These contributions would then be reflected in the transfer deed and the owners would be advised to enter into a Declaration of Trust.
A declaration of trust is a legal document which sets out the owner’s wishes and shares of ownership. On the sale of the property, the sale proceeds would be split in accordance with the trust document.
You must ensure you fully understand the implications of entering into this trust deed prior to proceeding with the purchase.
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