Tenants in common versus joint tenants: what does it mean when a solicitor asks how you want to own a property?

When buying a residential or a commercial property with another person, how the parties determine the ownership is very important, and it is therefore vital to have an understanding of the different options available. There are two options that need to be considered:

  1. tenants in common; and
  2. joint tenants.

They are slightly confusing terms, as many people (particularly first-time residential buyers) may normally associate the word “tenant” with someone who is renting a property.

The main reason to be clear on which option you choose is because it may well determine what happens to the property if one of the owners dies, or (if you are an unmarried couple) you separate. Part of the consideration should also centre around how much each party is contributing to the purchase. Do you wish for this share to be reflected moving forward?

Tenants in common

Tenants in common is often the preferred method of ownership for unmarried couples, business partners or friends purchasing a property together. Each buyer has a specific share of the property and if you decide to sell up, the proceeds will be divided accordingly.

Tenants in common is especially suited to situations where a buyer and their partner are investing different amounts of money in the purchase, as it can be reflected in the part you own. One downside for an unmarried couple may be that if one of them dies, their share would not automatically pass to the survivor. If the parties want the surviving owner to be able to continue living in the property, it is important to make wills leaving the shares to each other.

Whatever the shares being contributed to the purchase, parties should consider whether they require a “declaration of trust”. This document records the arrangement between anyone with a financial interest in the property and may include items such as:

  • how much each person contributed to the deposit;
  • details of gifts or loans from parents;
  • how much will be repaid;
  • the percentages of the property owned; and
  • how any money will be divided when the property is sold.

The declaration of trust must be executed as a deed and is then recorded as a restriction on the title at HM Land Registry.

Joint tenants

When buying as joint tenants, each party has an interest in the whole property. If one of the buyers dies, then their share passes to the survivor. This is called the “right of survivorship”.

Therefore, any interest a buyer has in the property terminates on death, even if a will has been made, and so the deceased owner cannot pass on any share of a property owned as a joint tenant. If you are buying a property, whether residential or commercial, with another party make sure you understand which method of ownership is best suited to your situation. The property solicitors at Scott Bailey in Lymington are highly experienced in advising clients on all manner of property transactions. Get in touch to learn more about how we can help with your residential conveyancing matter.