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Questions about joint ownership
When two or more people purchase a property together there are two methods by which they can own it, either as "joint tenants" or as "tenants in common".
In either case, when you legally own the property you are trustees. We explain here the differences between joint tenants and tenants in common, as well as advise on which option is the best for you.
This is the most common form of joint ownership. If you sell the property, or if you separate, it will be presumed that you both own the property equally, regardless of your respective contributions to the purchase price. It also means that if one of the parties dies, the survivor or survivors automatically own the whole of the property, irrespective of what any Will of the person who has died might say. All that needs to be produced to the Land Registry in future is a death certificate, showing the death of the joint owner concerned. The survivor or survivors can then deal with the property absolutely in their own right. It is an administratively simple procedure and does not involve any further legal documentation.
Married couples or those in a civil partnership commonly use this method of co-ownership because the right of survivorship makes it straightforward to inherit each other’s shares in the property.
If you decide to hold the property as joints tenants but then wish to split your interests at a later date, you can “sever” the joint tenancy and turn it into a tenancy in common at any time.
You should be aware that if you decide to hold the property as joint tenants:
- Either party can sever the joint tenancy without the other’s agreement
- The joint tenancy may be severed automatically in several situations, including where one party becomes bankrupt.
However, there may be reasons not to become joint tenants. For example, if one of you has made a larger contribution to the purchase price of the property, you would want this to be recognised if the property is sold or you separate. A joint tenancy is also not suitable if you have a family from an earlier marriage or relationship and wish to leave your interest in the property to them, instead of passing it to the co-owner.
Tenants in common
This is where each owner has a specified share in the property; that share may be a half or it can be another division agreed on before the property is purchased. The specified share can be transferred or otherwise dealt with by its owner at any time, for example by Will or sale. It does not necessarily have to be passed to the other joint owner. There are advantages to this when friends are purchasing together and might wish to leave their share in the property to immediate family if they die opposed to the other joint owner or owners.
The above principles apply equally in cases where co-owners split up. In recent times it has become more important for buyers of property to consider fully their intentions in relation to the money that they may be providing for the purchase. If couples split up and there is no agreement entered into at the time of the purchase it is not always easy to establish what was intended without such an agreement. In cases where there has been a dispute, the Courts have recently been deciding that it is appropriate to split the sale proceeds between the parties in the proportions provided when the property was bought.
If you are investing unequal shares, we strongly advise that you state this prior to purchase. If you choose to own your property as Joint Tenants there is no protection for you if you have invested a greater share in the property. In the event the property is sold you will be equally entitled to the net proceeds of sale regardless of whether you have made unequal contributions to the purchase price or even if one party has made no contribution.
If it is a simple split of shares then this can be protected by a clause in the transfer of the property into joint names without additional cost. You will need to add these shares into the “Ownership Section” on the transaction Information Form.
Declaration of trust
We would recommend that you ask us to prepare a separate agreement, a declaration of trust, to reflect your wishes as to what would happen should the relationship dissolve e.g. whether the property should be sold or one party buy the other party out etc. The additional cost involved prior to purchase may save a considerable amount of upset and much greater cost later.
Living together agreements
Entering into a living together agreement (otherwise known as a cohabitation agreement), with or without a declaration of trust, will help to set down some practical guidelines for the relationship between you and your partner. These guidelines can be over and above arrangements strictly in relation to any property you own together.
While you may not want to consider during a relationship the possibility that the relationship could come to an end, a cohabitation agreement will make things make clearer and less painful should you separate.
A cohabitation agreement will make it clear who owns what and who is responsible for what. Everyone’s situation is very different but a cohabitation agreement can set down:-
- Responsibility for payment of bills and other living expenses;
- Arrangements for children
- Ownership of contents/furniture if you should separate;
- Responsibility for debts (both during the relationship and if you should separate);
- Inheritance (one of the most important documents you will do in your lifetime is a Will, our Private Client department can assist you with making sure your affairs are in order and you have planned for your future).
You do not need to be a couple to enter into a cohabitation agreement. Anyone buying a property together should seriously consider having one. The cost is likely to be very small compared to the financial and emotional costs of going to Court and/or arguing at length about arrangements following the breakdown of a relationship.
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