Joint Ownership & Owning in Shares

If you are buying property with someone else, you need to think carefully about how you will own it. Will it be in your sole name or in joint names?

When two or more people own a property together, there are two options:

  • Joint ownership (a ‘joint tenancy’)
  • Owning in shares (a ‘tenancy in common’)

Confusingly, neither of these options has anything to do with renting property.

Selecting the best option for your particular circumstances is essential because there can be important consequences later on if one joint owner dies or the relationship breaks down. The method of ownership can also affect Inheritance Tax and whenever you are acquiring a property, we strongly recommend that you make a new Will.

Unfortunately, our Dispute Resolution team often comes across co-ownership disputes which could have been avoided if proper legal advice had been taken. They also handle claims against other solicitors and conveyancers who have failed to advise people properly which can have drastic consequences particularly when people separate or die.

Joint ownership (a ‘joint tenancy’)

This is where two (or more) people own the whole of the property jointly rather than owning distinct shares.

If you die, the whole of the property will pass automatically to the surviving owner rather than under your Will.

This method is popular with married couples but might not be suitable if you have children from a previous relationship who you want to benefit under your Will.

Owning in shares (a ‘tenancy in common’)

This is where two (or more) people divide the property into distinct shares. The property could be shared 50:50 but if one person contributes 70% of the purchase price and the other 30%, they might want to own the property 70:30.

If you die, your share will pass under the terms of your Will (or your next of kin if you have not left a valid Will).

This method might be appropriate where:

  • You are not making equal contributions towards the purchase price
  • You will not be making equal contributions to mortgage repayments
  • You are an unmarried couple (you should also consider a Cohabitation Agreement)
  • You want your children from a previous relationship to benefit under your Will
  • You are planning to reduce your potential Inheritance Tax  liabilities
  • You are buying a property with a business partner

If you own a property in shares, we strongly recommend that you make a new Will.

Declarations of Trust

If you decide to own a property in shares (a tenancy in common), the standard Land Registry forms can be used to specify the percentages. However, we usually recommend a rather more sophisticated document called a Declaration of Trust. As well as specifying the proportions in which the property is to be shared, a Declaration of Trust can deal with issues such as:

  • Whether the shares should increase proportionately if the value of the property increases (or decrease if property prices fall)
  • How the shares are to be calculated - initial lump sums paid towards the purchase price should be taken into account but so too should mortgage payments and household bills
  • Responsibility for repairs, maintenance and insurance
  • What will happen if there is a change in the contributions towards the mortgage or other outgoings
  • Who can live in the property
  • Who decides when the property can be sold
  • A right for one owner to buy out the share of the other at current market value and how the market value is to be assessed
  • What will happen if one co-owner moves out before the property is sold
  • What will happen if the property falls into negative equity
  • What should happen if one of you dies or if you separate

A Declaration of Trust can be varied in the future, but only if both parties agree.

Converting from joint ownership to owning in shares

It is possible to convert from joint ownership (a ‘joint tenancy’) to ownership in shares (a ‘tenancy in common’) at any time by one co-owner giving notice to the other (a ‘notice of severance’). There is no need for the other owner to consent.

The effect of the notice is that each owner will have a 50% share irrespective of the amount they contributed towards the initial purchase price.

All joint owners should think carefully about which method of co-ownership is best for them. Getting proper legal advice and recording your wishes in a Declaration of Trust with an updated Will can provide certainty for joint owners, Inheritance Tax savings and prevent expensive disputes in the future.