When purchasing a property jointly with another person, you will need to consider how you wish to legally hold the property together. You can either hold the property as Beneficial Joint Tenants or as Tenants in Common. Knowing the difference between the two is crucial, as each of these options has different consequences going forward.
| What are Beneficial Joint Tenants?
If you elect to hold the property as Beneficial Joint Tenants this means that all the owners of the Property will hold the equity in the property together in equal shares, as a single entity.
As Beneficial Joint Tenants when you come to sell the property, on completion (after the payment of any mortgages, agency and legal fees) you will each receive an equal share of the net sale proceeds.
If one owner passes away, the surviving owner or owners will hold the whole of the equity in the property in equal shares or if only one owner remains, they will automatically own the whole of the equity in the property. An owners share in a property held as Beneficial Joint Tenants does not form part of their estate for inheritance purposes and cannot be passed on in their Will unless at the time of death, they have already become the sole remaining owner.
| What are Tenants in Common?
Tenants in Common means that although you still own the property jointly, each owner holds a distinct proportion of the equity in the property. Quite often each person’s share is equal (eg, if 2 owners – 50% 50%) however it is possible for the property to be held unequally in shares, such as 90%-10%; 60%-40% or any other proportion that the owners agree.
As Tenants in Common when you come to sell the property, on completion (after the payment of any mortgages, agency and legal fees) you will each receive the agreed proportion of the net sale proceeds.
If one owner passes away, then unlike Beneficial Joint Tenants that owner’s share does not automatically become the surviving owners, the deceased’s share is an asset that would be dealt with either by a Will or by the Intestacy Rules if the deceased does not have a Will.
| How should I hold the property?
Most married couples hold the Property as Beneficial Joint Tenants.
Tenants in Common is usually an option used when: –
- there is an unequal financial contribution made towards the purchase of the property
- the buyers may agree to hold as tenants in common in proportions which reflect the amounts that each buyer has contributed towards the deposit
- buyers with business considerations – the buyers may wish for one owner to own the majority share of the equity in the property
- buyers with personal circumstance considerations for example where a buyer’s share needs to remain an asset to be distributed in accordance with that buyer’s Will due to the existence of children from a previous marriage
If you wish to hold the property as Tenants in Common in unequal shares you will need to enter into a Declaration of Trust to reflect your wishes.
If you would like some more information about Beneficial Joint Tenants and Tenants in Common or a Declaration of Trust, please get in touch with our Residential Conveyancing team on 0800 988 7756 or email firstname.lastname@example.org to discuss this.