We are buying a property together – what is the best option for ownership?

When purchasing a property jointly, there are two ways in which the property can be held beneficially, which is either as joint tenants or as tenants in common.

Lisha Broderick, a specialist in residential conveyancing at our Rawtenstall office, outlines the difference between the two options. She also covers what is important to consider if you are in the process of purchasing a property with a partner or spouse, or perhaps a business partner, friend or family member.

The features and benefits of joint tenant ownership

People who purchase properties as joint tenants have equal rights to the whole property and the property will automatically pass to the survivor(s) upon the first death.

Joint ownership is ideal for married couples, or couples who intend to leave the property to each other upon death. Neither owner holds a specific ‘share’ and on the sale of the property each owner is entitled to half of the sale proceeds regardless of deposit contributions and/or mortgage repayments.

As mentioned above, upon the first death, the property will automatically pass to the surviving joint tenant(s), irrespective of any conflicting instructions in the deceased’s will.

It is important to note that after the first death the survivor will be able to dispose of the property as they choose. This option may therefore not be suitable for couples with children from former relationships.

Alternatively, people who purchase a property as tenants in common own a specific agreed share of the property, which may be either in equal or unequal shares.

Property ownership as tenants in common with equal shares

Tenants in common in equal shares means each owner holds a 50 per cent share in the property.

This means as a property owner you are entitled to dispose of your 50 per cent share within a will to your chosen beneficiaries.

If there is no will, your share will pass to your immediate relatives under the rules of intestacy.

Therefore, if you opt for owning a property as tenants in common it is imperative and strongly advisable to prepare a will to reflect your wishes.

This option may be preferable for stepfamilies, following tax planning advice, or for business partners.

Property ownership as tenants in common with unequal shares

This option is the same as the option above, each owner holds an identifiable share within the property, but in this case it is unequally.

A tenancy in common in unequal shares should be seriously considered if the financial contributions by the parties to the property at the outset is evidently different. For example, if one owner intends to contribute a larger sum of money towards the deposit than the other, or make most of the mortgage repayments, this can be reflected in the ownership shares.

The ownership share will then be reflected in the distribution of the proceeds of sale when you come to sell the property. The arrangements must obviously be discussed very carefully.

The ownership proportions will need to be incorporated into the transfer deed or in a separate declaration of trust. On the sale of the property the proceeds will be split in accordance with the transfer deed or declaration of trust.

This option may be beneficial for couples who wish to protect their contribution, or potentially a gifted deposit from a family member.

As above, you are entitled to dispose of your share of the property in your will in whichever way you wish.

Changing property ownership to cover a change in circumstances

If you are a joint tenant in a property, you can end the joint tenancy at any time and convert it to a tenancy in common. This is called ‘severance of joint tenancy’. You may need to change from joint tenants to tenants in common if you divorce or separate from your partner but still own property together and want to leave your share of the property to someone else. You can make this change without the other owners’ agreement.

Alternatively, you may want to change from separately owning a portion of the same property as tenants in common to fully committing to owning as joint tenants. This may be that you have since gotten married and want to have the benefits of owning a home as one single family unit with equal share and ownership.

There are many considerations at play when making these choices. While joint ownership may seem like the traditional option and the right choice emotionally for couples, there are numerous factors which you should consider about the possible outcomes; in particular in the event of death of one or both joint owners, separation, divorce and future marriage of the survivor.

It should be recognised however that it is always vital that a will is made or updated whenever property is owned, especially if held as tenants in common.

Lisha Broderick is a specialist in residential conveyancing and assists clients with conveyancing transactions and with residential property and sales.

For further advice and information to consider the best property option for you, please contact Lisha on 01706 244400 or by email:  Lisha.broderick@whnsolicitors.co.uk or visit our Residential Conveyancing page to find out more about how we can help.