Tenants In Common Vs Joint Tenants: What You Need To Know

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With the current housing market like it is, it can take a minor miracle for couples or partners who are first-time buyers to get a foot on the housing ladder. But that daunting prospect can be much worse for people struggling to meet the almost impossible task of saving for a deposit. That’s why many prospective homeowners willingly seek to buy their first house or flat with another person – their partner or a friend or relative – pool their deposit money towards a bigger mortgage, and share the responsibility of making the monthly repayments. But who owns the house? Owning a property can be confusing, opening up a tenants in common vs joint tenants conundrum. This expert guide will tell you everything you need to know about tenants in common vs joint tenants, where you stand, and who owns what.

What is joint tenancy?

Under a joint tenancy agreement, 100% property ownership is split evenly between two parties, rather than one partner owning a larger share. It’s the most common and popular way for married couples to buy property together as everything is split equally with shared responsibility. 

From a legal angle, both parties act as a single owner with one mortgage. Also, both parties will make joint decisions on whether or when to sell. And as a joint tenant, when the first person passes away, the property will naturally pass to the other owner by Right of Survivorship and not via their Will. 

Pros and cons of joint tenancy

As the most common way to do home ownership, joint tenancy has plenty of benefits. But there are also some risks as well as some drawbacks. Let’s list out the pros and cons of joint tenancy.

Pros

✔︎ Straightforward route to home ownership

✔︎ Fewer legal fees and paperwork 

✔︎ Equal rights to the property for both parties

✔︎ Right of Survivorship for couples

✔︎ Rights to an equal share of any rent or profits from the property

Cons

✘ It doesn’t allow for an unequal split in ownership

✘ House sale proceeds are split 50/50 even if one party contributes less

✘ Lack of property inheritance rights for benefactors

✘ Greater financial responsibility

What does it mean to buy as joint tenants?

Joint tenancy can be the more obvious option for couples looking to become homeowners. The process for joint tenancy makes for the easiest way to buy a home, sell it, or divide proceeds in the event of separation.

It doesn’t need much overthinking when working out how much each partner puts into the asking price, and it’s simply divided 50/50, as are the ongoing finances. And if the relationship ends before death (when Right to Survivorship begins), joint tenants also have options. The choice is there either to both move out and sell the property, then divide the proceeds equally. Or, if one wants to stay at the property, they can buy out the 50% share of the other and continue living there.

What is tenancy in common?

When you buy a home as tenants in common, the ownership of the property splits, but each person will own a separate share. As tenants in common, it’s a convenient way to split ownership if it’s a group of friends or family members – even couples – who are pitching in to buy together.

But while up to four people can own a property as tenants in common, the separate shares don’t need to be split equally. For example, with three people as tenants in common, one person may contribute more to the purchase price and could own a 50% share, while the other two might own a 25% share each. The share of ownership also reflects in the level of repayments that each person makes.

While it’s common to have a single mortgage for tenants in common, each owner has their own share of the property they can leave to someone in their Will as there’s no Right to Survivorship. These are major differences from a joint tenancy mortgage. Tenants in common can also have a Deed of Trust drawn up (see below) by an estate administration solicitor like MJR Solicitors, which can provide greater detail on who owns what in the property beyond their share.

Pros and cons of tenancy in common

As a different way to get on the ladder and own a home, a tenancy in common can be a great way to spread the risk, but there are also some downsides. Let’s look at the pros and cons of tenants in common.

Pros

✔︎ Each person owns a share of the property

✔︎ Easier to sell a share

✔︎ Your share can pass via your Will or via Intestacy rules if no Will is in place

✔︎ Financial risk is spread

✔︎ No fewer rights, even with a smaller share

✔︎ Can help reduce inheritance tax and care fees

Cons

✘ A Deed of Trust can add expense

✘ You’ll need a Will to clarify who your share goes to

✘ Shares can be sold to anyone without approval from other co-owners

✘ Selling a share still needs all co-owners to sign transfer deeds

What does it mean to buy as tenants in common?

Buying as a group of up to 4 tenants in common means you have a much better chance of owning a home, even though it’s a smaller share, with a smaller deposit. And while it’s a suitable way to get on the housing ladder for friends or family members, it works just as well for couples.

While split ownership can seem complicated, the main advantage is that the owner of each share is free to sell it if they want to or, more importantly, leave it to a chosen beneficiary as part of their Will. This method can work for couples who may be in a second marriage where having more children is unlikely but want to leave their share of the property for their children from a previous relationship.

However, if one of the owners falls into financial difficulties, they may need to sell their share of the property, therefore putting the others at risk if they can’t afford to buy them out or find a replacement owner.

What is a Deed of Trust?

As briefly mentioned above, a Deed of Trust (or Declaration of Trust) is a legal document that can be drawn up between tenants in common to clarify who owns what beyond the percentage of their legally owned share. While stating how much each person has contributed as their deposit towards the house purchase, it will also specify what happens to the money if/when:

• The property is sold

• The relationship breaks down

• One owner buy wants to buy the other out

A Deed of Trust isn’t a legal requirement. Still, it’s recommended as an official record of the financial agreements of all tenants in common buying a home together or those with a financial interest in it. 

Do you need a Cohabitation Agreement?

A Cohabitation Agreement works like a Deed of Trust but takes things a step further for anyone sharing a home. This kind of ‘living together agreement’ can cover matters beyond ownership, focusing on more general, day-to-day things, including:

• Who’s responsible for specific home bills or repairs

• How any finances are handled

• Who’s responsible for other assets like cars, caravans, or equipment

• Who will settle debts if the relationship breaks down

• Who takes ownership and responsibility of any pets

While some of these points might sound pessimistic when starting on the journey of home ownership, drawing up an agreement like this can save arguments or even legal action further down the line. Much like the Deed of Trust, a Cohabitation Agreement isn’t legally required, but if you want one to be legally binding, an estate administration solicitor like MJR Solicitors can handle that for you.

Tenants in common vs joint tenants

Making that choice between buying your home as joint tenants or tenants in common is a big decision and can have a knock-on effect on you and others around you, primarily if a property is sold or if someone dies. Here’s a list highlighting the key differences between tenants in common vs joint tenants.

Joint Tenants

✔︎ Both tenants own 100%

✔︎ Your share passes to the other joint owner after your death

✔︎ Your financial contributions aren’t reflected in ownership

✔︎ Both parties need to agree on any sale

✔︎ You don’t need a Deed of Trust

Tenants in Common

✔︎ All tenants own equal or unequal shares

✔︎ Your share passes to chosen beneficiaries after your death

✔︎ Your financial contributions are reflected in your ownership

✔︎ Both parties need to agree on any sale

✔︎ You don’t need a Deed of Trust, but it’s recommended

Effective estate administration from MJR Solicitors 

While this guide should help to give you an overview of tenants in common vs joint tenants and what’s involved, there can still be plenty of grey areas to look into. If you’re thinking about buying a property with your partner, or as part of a group of friends or family, and need some straightforward, jargon-free help and advice in deciding the best option for you, contact MJR Solicitors today.

Contact us and leave a message, call us on 01243 945 054, or email us at info@mjrsolicitors.co.uk today, and our expert estate administration and conveyancing team will be on hand to help you with everything from Agreements to Wills.

Mark Riley

Mark Riley is a specialist lawyer offering services in Criminal Law and Professional Misconduct Cases. Mark has studied around the world, including time in Australia. Whilst there he met many amazing and inspirational lawyers. Mark is a passionate advocate and can be found in Courts up and down the Country having practised in Magistrates' Courts, Crown Courts and various Tribunals.
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