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Should You Purchase Property As a Joint Tenant Or Tenant In Common?

Getting on the property ladder is becoming tougher, especially in London and the Southeast.  Increasingly people are choosing to buy with a partner or friends, pooling resources together to make that crucial first home purchase.

Buying a property is likely to be the biggest financial investment you will ever make.  Therefore, if you are entering into a mortgage with a partner, family members or friends, you need to ensure your interests are legally protected and that what you put into the house, in terms of capital, you will get out again.

Let’s get together

Up to four people can share joint ownership of a property.

Your rights as a joint owner are as follows:

  • no one can force you to leave the property without obtaining an order from the court
  • you must give permission for the property to be sold (unless there is a court order)
  • you need to agree before further loans can be taken out on the property

At the time of purchasing, your conveyancing solicitor will register all owners of the property with HM Land Registry.  What you will need to decide is whether you wish to buy the property as Joint Tenants or Tenants in Common.

Joint tenants

As Joint Tenants, all the purchasers own 100% equal share of the property, in other words, they act as a single owner.  One mortgage is obtained to cover the whole value of the house and land acquired.

One advantage of entering into a joint tenancy is if one of the owners dies, the property automatically passes on to the other owner/s.  In legal terms, this is known as the ‘right of survivorship.’  This provides security if you are in a cohabiting relationship, as your partner will get to keep the entire property, even if you die intestate.

However, the consequence of a joint tenancy may be disadvantageous if you are not buying with a romantic partner.  If you are purchasing a home with friends or family, you may prefer a third party to inherit your share of the property should you die.  Those with children from a previous relationship should also be aware that your interest in the property will automatically pass onto the other Joint Tenant/s, meaning those children cannot inherit your share.

Joint tenancies can also cause issues if the relationship between the owners breaks down.  If this happens, the net proceeds of the property’s sale will be split 50/50, regardless of how much each partner put in the purchase and upkeep.  Note: a 50/50 split in proceeds may not necessarily apply to married couples as there is specific legislation with deals with matrimonial property in the event of a divorce.

A joint tenancy can be severed, so the right of survivorship ceases to apply (this often happens when a married couple separate).  A Notice of Severance, signed and dated by the party who wishes to sever, will need to be served upon the co-owner. This could be done by simply sending the Notice of Severance to the other party in the post and asking that they sign and date the notice themselves and return it.  The Notice will then need to be registered with HM Land Registry.  As long as the Land Registry is satisfied that the Notice of Severance has been served on the co-owner, they will register the required restriction, even if the co-owner fails to sign the Notice.

Tenants in common

In contrast, Tenants in Common each own an agreed percentage of the property they purchase with others, and the percentages do not have to be equal.

For example, if you are buying with a partner and you have a majority of the deposit and plan to pay more of the mortgage, you could buy the property as Tenants in Common, with you owning 75% of the property and your partner having a 25% stake.

Tenancies in common are often utilised when one or both of the parties have children from a previous relationship and wish to provide for them in their Will.

In theory, each tenant in common can take out a separate mortgage to finance their share of the property purchase, but few lenders will agree to this.  A mortgage over the entire property is normally obtained, with owners working out between them how to make payments.

Deciding whether to choose a joint tenancy or Tenancy in Common

A Joint Tenancy and a Tenancy in Common both have advantages and disadvantages.  When choosing to purchase a property with one or more people, it is crucial to get experienced legal advice so you can weigh up which option is best for you.

Bennett Griffin are award winning solicitors based in West Sussex with offices in central Worthing and Ferring.  Our experienced and specialist solicitors offer a comprehensive service and will work with you in an honest, considered, and practical manner.  Our residential property department is able to advise and assist you in relation to buying your first home.  Please contact us on 01903 229 999 or by email at info@bennett-griffin.co.uk for more information.

The information contained in this article is for general guidance only and is not intended to be legal advice. Professional advice should always be taken on the application of the law in any particular situation.