What is the difference between Joint Tenants and Tenants in Common?
Joint Tenants – The joint owners are regarded by the law as owning the whole of the property without any form of separate share or distinction between them. On the death of one of the Joint Tenants the whole of the property passes to the survivor or survivors. Normally the sole survivor of two Joint Tenants can sell the property and only needs a death certificate to prove their title or ownership. This is a very common and convenient form of ownership between husband and wife where the parties are content for the survivor to be the absolute owner. Where property is owned as Joint Tenants transfer of ownership on death is automatic. The ownership of the land held as Joint Tenants cannot be altered by a will. A will made by a Joint Tenant, which leaves the land to anyone other than another Joint Tenant would be ineffective.
Where co-owners are not married, or have made different contributions to the price, the preferred form of joint ownership will usually be as Tenants in Common.
Tenants-in-Common – This means that the co-owners are regarded in law as having separate and distinct shares. They may give their shares away by will, they may even charge or mortgage them to a lender. On death of a Tenant-in-Common the share of the deceased co-owner is protected by the requirement that another trustee has to be appointed before the land or property can be sold. If the shares are complex a separate trust deed will usually be drawn up setting the shares out.
How does it effect my will?
The terms “joint tenants” and “tenants in common” are used to describe the way in which two or more people can own a property. (They have nothing to do with tenancies or leases.)
If two people own a house as “joint tenants”, then, when one of them dies, the other person will automatically become owner of the whole house (regardless of the terms of the deceased owner’s will). A married couple will usually choose to own their home as joint tenants.
If, on the other hand, two people own their home as “tenants in common”, each person only owns a share in the home (usually quantified according to their contributions to the purchase price). When one tenant in common dies, his or her share will pass into their estate and be dealt with by the personal representatives, either under the terms of his or her will or according to the so-called rules of intestacy. (You will see, therefore, that a tenant in common can leave their share in their will, unlike a joint tenant.) A couple who buy a house together and who are not married will usually choose to own the house as tenants in common.
or, put another way…
Property registration in which two or more individuals own a certain proportion of a property. Each person’s proportion is distributable as part of the owners estate, so that if one of the account holders dies, that owner’s heirs are entitled to that proportional share of the account.
Parties in a stable relationship, but unmarried, also often choose this way of holding the property, but if this applies to you, you should only do this with care. In particular, where people come to a relationship with children by a first marriage, a joint tenancy can disinherit the children of the spouse who dies first. His or her interest will pass straight to the survivor, and the children will then be dependent upon gifts made by the surviving spouse (who may again remarry). This cannot be controlled by a will very easily – property held under a joint tenancy can not be disposed of by a will.
In a joint tenancy, whatever the proportions in which the parties have actually contributed to the purchase price, and/or to the maintenance of the property or mortgage, the only safe working assumption is that any proceeds of sale will be divided equally. To put a house in joint names is to make a gift of any excess contribution to the other party.
Tenants in common each own a specified share of the property. When one owner dies, his or her share falls into that person’s estate and passes according to their will, or as on intestacy. This mode of tenancy can sometimes be used as part of estate planning (trying to pay as little tax as possible). This is much the better way to hold property in all circumstances where a joint tenancy is not immediately and obviously appropriate.
For tenants in common it is sensible and sometimes necessary, both to make wills, and also to be crystal clear about the precise agreement between the owners on such matters as the proportions in which the property is owned, who can live in the house, who decides when the property is to be sold, and so forth. We can advise you about the issues you should consider. The agreement is then best recorded in a formal trust deed. As an absolute, and inadequate, minimum, the details should be recorded in writing and signed by each of you.
As you currently own your property as Joint Tenants on the death of one of the owners, the property would then pass automatically to the surviving joint owner and cannot be controlled by a Will. However, changing to Tenants in Common allows you to control the destiny of your share.
When changing to Tenants in Common it allows you to each own a share in your property (ie 50/50 via our online form or 70/30 etc. by phoning our office on 01305 774786) and then to gift the property on your death whilst giving the surviving spouse a lifetime interest in the property. This means that your spouse can live in the property for a lifetime or for a specified period or with a proviso (ie until the children reach a particular age or until your spouse remarries). You can also have a say in whether the survivor is allowed to sell the property and upgrade or downscale.
What if I buy a house with a friend?
When two or more persons buy a property together, that property will be held in one of two ways, either as ‘joint tenants’ or as ‘tenants in common’.
In a Joint Tenancy, each person owns all the property. When one joint tenant dies, his interest disappears immediately before his death. Since the survivor already owns all the property, nothing passes or is transferred under any will, and little more needs be done, other than to record the death. This is simple, and convenient, but is only appropriate, usually, within the context of a marriage. Joint tenancies can become inappropriate where the parties may need to plan to reduce Inheritance Tax liabilities
What are the benefits to owning your property as Tenants in Common?
1. You protect your children’s inheritance in the event that the survivor should remarry
2. It can help protect you from inheritance tax
3. It can help protect you from care home fees if either of you should require care later on in life
4. It is written into your Will so only you can change it