Joint tenancy vs tenancy in common
Okay, so you've decided to buy a place with someone else, but you've yet to decide whether you want to own the property as joint tenants or tenants in common.
What are the differences?
In a joint tenancy, each person owns the whole property. If one of you dies the property automatically passes to the other joint tenant(s), which is known legally as the right of survivorship.
Not more than four people can own a property as joint tenants at any one time.
Moreover, four 'unities' must exist to constitute a valid joint tenancy:
- Unity of title: this means the joint tenants must hold title to the property under one document (i.e., the title deeds).
- Unity of time: the joint tenancy must start and end on the same date for all the joint tenants.
- Unity of possession: all joint tenants have equal rights to possess the whole property.
- Unity of interest: joint tenants must have equal interests in the whole of the property.
In contrast, in a tenancy in common only one of the above unities must exist: the unity of possession. All owners have equal rights to possess the whole of the property. But each of you owns a specified proportion of it. For example, you might stipulate that you own the property equally; or that one of you owns a 70% interest and the other 30%; or specify that the proportionate interests in the property are divided in some other way.
In a tenancy in common, if one of you dies the deceased's proportionate interest in the property (be it 50%, 30%, whatever...) will not pass automatically to the survivor. Instead, the deceased's will determines who takes the interest... provided, of course, they write a will. If they don't write a will, the interest is distributed in accordance with the laws of intestacy.
If you intend to contribute different amounts to purchase a property or become tenants in common you should ask a solicitor to draw up a trust deed. This document sets out your respective shares in the property and can be used in the event of a dispute or death of a party.
This is my second marriage. How do I ensure that my children from my first marriage inherit my share in the property rather than my new spouse?
The property will pass automatically by right of survivorship to your spouse if you set up a joint tenancy. Thus, a tenancy in common would be preferable to ensure your children inherit your interest.
You should also draft a will and state that you want your share in the property to pass to your children. If you fail to do so the rules of intestacy will dictate who gets what.
(NB. Under the intestacy rules, your spouse would receive all of your personal chattels (e.g., clothes, jewelry, etc), a statutory legacy of £250,000, plus a life interest in half of anything that remains. Your children (or their offspring, if deceased) would receive the other half of anything that remains and the capital that is left after your spouse's life interest ends.)
Can we set up a joint tenancy even if we contribute differently to the purchase price, mortgage, or maintenance of the property?
Yes. In a joint tenancy, your respective contributions to the purchase price, mortgage, or maintenance will have no effect on your ownership of the property -- you will both own the whole, as discussed above.
What if I include something in my will stating that I want my interest in the joint tenancy to pass to someone other than the joint tenant?
The right of survivorship under the joint tenancy will take precedence over the will provision -- which means your interest will pass automatically to the other joint tenant -- unless you exercise your right to sever the joint tenancy before you die. Severance of the joint tenancy may occur at any time either through written agreement or, if you cannot agree terms with the other joint tenant, by court order.
What if one, or both, of us want to change the way we own the property? (e.g., we decide to separate)
If ever you want to change the way you own your property, or have any questions about the different ways you can hold title, you should consult a solicitor who specialises in conveyancing.
So what's best: joint tenancy or tenancy in common?
There are advantages and disadvantages to both. Which one is best for you will depend on your individual needs and circumstances. Many married couples opt for joint tenancies because they don't perceive any advantage in defining separate shares -- particularly if they want the property to pass automatically to the surviving spouse if one of them dies.
Tenancy in common may be more suitable for couples where one spouse has children from a prior relationship (see above), unmarried couples, brothers and sisters, parents and children, or business partners -- since in these cases one of the title-holders may not want the other owner(s) to inherit their share.