Wednesday, March 13, 2013

Joint Tenants or Tenants in Common?

Brought to you by our friends at Stephens Scown Solicitors

In today’s society we are seeing a trend of people entering into property purchases with complex family trees, friends grouping together due to the increasing difficulties in obtaining mortgages, and substantially more couples are co-habiting than ever before. 

So what is there that you need to think about before entering into such a purchase?  You have got your deposit and legal fees, you have found the perfect house, and you have finally received that long awaited mortgage offer.  One aspect of a property purchase which is repeatedly over looked is how people are holding their properties. 

There are two legal types of joint ownership, either joint tenants, or tenants in common.  When looking at which option is most applicable to your situation, it is important to assess all of the facts involved. 

For example, are you a married couple who would wish that should one of you die the deceased’s share in the property would automatically pass to the surviving party?  If this is the case, the most suitable scenario would be entering into the property transaction as joint tenants. 

However,imagine the situation differed slightly, and instead you are a married couple with children from previous relationships.  In this situation if the property was held as joint tenants, upon the death of one owner the property would pass in its entirety to the surviving owner, leaving some possibly disgruntled children with nothing to inherit.  If the property had been held by you as tenants in common this allows for the deceased’s share in the property to pass according to the terms of their will, or if there is no will under the rules of intestacy. Of course this does raise the question of whether or not the surviving owner would be able to remain living in the property, and this is a situation which can be remedied by ensuring there is a provision for a life interest in the property. 

Tenants in common allows for each owner to have a stated share in the property, for example, in your situation has one of the purchaser’s contributed a significantly higher proportion of the deposit? If this is the case, it is important that this interest in the property is protected against any future personal eventualities.

If you decide to enter into a property transaction and hold the property as tenants in common it is important you consider making a Declaration of Trust.  A Declaration of Trust will provide confirmation of each owner’s share in the property, and will also provide clarity in respect of potential difficulties which can be faced in the future.  For example, what if one of the owners wished to sell their share in the property, or who is responsible for what proportion of the outgoings in the property? If no share is stated then the law assumes the shares are equal. 

A further reason for looking to hold a property as tenants in common relates to saving inheritance tax, and protection against being in a situation which may require the sale of your property should you have to move to a care home. It is important that you discuss all of these situations with your legal representative before deciding in which manner you wish to hold your property. 

There are many factors to be taken into consideration when deciding how you wish to own your property, many of which will be personal to your situation.  It is therefore important you discuss with your legal representative any issues which you may feel will impact how you hold the property. 
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