Joint ownership of property is one of the most misunderstood areas of law by persons purchasing a property or indeed making a will. Time and time again we ask how a property is owned or how it is intended to be owned the answer is “jointly”. But what does jointly mean in terms of property ownership and why should you care?
There are two types of property ownership; property can be held as either joint tenants or tenants in common. How you choose to own the property can affect both how the net sale proceeds are divided (if they are divided at all!) and/or what happens to your interest in the property in the event of death.
If a property is held as joint tenants there is a presumption that the property is held in equal shares by the property owners. The other distinguishing feature is that the right of survivorship automatically applies – this means that in the event of the death of one of the property owners the deceased share will pass automatically to the surviving co –owner(s) of the property. The deceased owner can then usually be removed from the land registry records by formally notifying the land registry of the death.
Tenants in Common
If property is held as tenants in common the property can be held by the property owners in equal or unequal shares. This is particularly useful when one party is contributing more to a property than another. The other distinction is that a right of survivorship does not apply to property held as tenants in common. So in the event of death of one of the owners the deceased share will be left to a beneficiary as specified in the deceased’s will or upon intestacy (where death occurs without a will).
In the event of a tenancy in common with unequal ownership it is recommended that a deed of trust is entered into setting out the respective contributions and terms of ownership between the parties to include if required who is responsible for the payment of bills, repairs etc.
You may be wondering how this relates in real life? Consider the scenarios below:
Daniel and Zoe are an unmarried couple. They decide to buy a property together. The property costs £600,000 the mortgage is in joint names for £300,000. Daniel is contributing £200,000 and Zoe is contributing £100,000. Daniel and Zoe wish to hold the property “jointly”.
Daniel and Zoe purchase the property as joint tenants. After owning the property for a couple of years sadly their relationship doesn’t work out and comes to an end so they decide to sell the property. As the property is owned as joint tenants there is a presumption that the equity (if any) will be split equally. You will note that Daniel contributed twice as much to the property as Zoe when the property was initially purchased.
Daniel and Zoe purchase the property as tenants in common having taken advice due to the unequal contributions being made by each of them. They decide to have a deed of trust drawn up which provides for the initial monetary contributions to be returned to each party in the event of sale with the remainder of the net sale proceeds being split equally. Therefore in the event of sale each party, providing there is sufficient equity in the property, safeguards their initial contributions.
Daniel and Zoe own the property as tenants in common as above. They do not sell the property and instead live in the house and plan a future together. At the time of buying the property they were advised to each have a will drafted since as we know there is no automatic right of survivorship with a tenants in common ownership.
They decided not to do this due to the expenses of buying the property and instead intend do so at a later date. Unfortunately they do not get round to doing it and sadly Zoe dies. Daniel does not inherit as there is no will. Zoe’s relatives now inherit. Daniel is left in the position of owning the property with Zoe’s family who now wish to sell the same. If Zoe had made a will leaving her share of her property to Daniel then this would not have occurred.
The above are examples in their most simplest form and are intended only to outline the different forms of joint ownership and their possible effects relating to both future resale of the property and/or in the event of death.