If you are buying a property jointly with someone else, you can either own it as joint tenants or as tenants in common. We look at why buying a property as tenants in common might be the right option and what you need to take into account when making your decision.
When you buy a home, your solicitor will be able to discuss the types of ownership with you and establish which will be best for your situation. It is an important decision and making the right choice should protect your share of your property.
What is the difference between tenants in common and joint tenants?
If you and your fellow owner hold a property as joint tenants, you own the whole property jointly, with neither of you owning a specified share. When the property is sold, you would usually split the proceeds 50:50. If one of you were to die, the other would automatically own the property and the deceased’s share would not pass to the beneficiaries named in their Will.
If you own a property as tenants in common, each of you owns a specified share. This could be 50% or you could own unequal shares, such as 75% and 25%. Your share will pass under the terms of your Will.
What are the advantages of owning a property as tenants in common?
Protecting a larger deposit
If you are paying a larger share of the deposit to buy your home, you can protect this by owning the property as tenants in common. Your share would be larger to reflect the bigger contribution that you have made to the purchase price.
Avoiding sideways disinheritance
Owning as tenants in common can be particularly important if you have remarried or live with someone, but want to protect your share of your home for your children from an earlier relationship.
If you own your property as joint tenants with your spouse or partner, they would automatically own the whole property if you were to die. They could leave it to their choice of beneficiary, such as their own children. Even if they have agreed not to do this, there is nothing to stop them changing their Will in the future. Alternatively, they could remarry and your share of your home could pass to their new spouse in due course.
If you own the property as tenants in common, you can leave your share of your home to your own children. If you would like your spouse or partner to be able to stay in the property for as long as they want, you can leave them a life interest. This means that they would not have to leave if you die, but when they do leave or when they die, your share will pass to your chosen beneficiaries.
This can also prevent money from your share of a property from being used in a way that you might not want, for example, to pay your spouse’s care home fees or being lost in a poor investment.
Giving a third person an interest in the property
If a third party has paid towards the property, for example, if a parent has paid a sum to help with the purchase, their share can be protected. This can be done either by the child holding a larger share, which would prevent it from being taken by the co-owner, or by the parent being a third tenant in common. You can have up to four tenants in common.
How to change your property ownership to tenants in common
If you own a property as joint tenants and you want to change the ownership to tenants in common, this is relatively straightforward to do. A property solicitor will be able to draw up a deed of trust setting out the shares each of you will hold and then sever the joint tenancy. You can sever a joint tenancy even if the other owner does not want to.
Why making a Will is essential if you own a property as tenants in common
If you own a share in a property as a tenant in common, you are strongly advised to make a Will. Should you die, your share will form part of your estate. It will either pass to the beneficiaries named in your Will or, if you do not have a valid Will, to those entitled to inherit under the Rules of Intestacy.
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