Joint Tenants vs Tenants in Common
When you buy a property jointly with one person or more, you will need to decide whether you will buy the property as beneficial joint tenants or tenants in common.
This decision will be influenced by your relationship with the other person, how much money you’re putting towards the purchase and also what you want to happen to your share in the property when you die.
Before you sign conveyancing paperwork to buy a house (i.e. a contract of sale and a transfer deed), your solicitor or conveyancer will ask you how you would like to purchase the property - as beneficial joint tenants or tenants in common.
Details of a joint tenancy or a tenants in common agreement will be set out in the Transfer document as a ‘Declaration of Trust’. The Transfer document is then submitted to the Land Registry to confirm new ownership details of a property and a restriction will be entered in the registers of title in relation to any trust.
If you purchase a property as tenants in common, your Solicitor or Conveyancer should also offer to draw up and execute a separate Deed of Trust (aka Declaration of Trust) to clarify the financial arrangements and percentage shares in the property. Again, any Deed of Trust will be referred to as a ‘restriction’ in the register of title to the property.
How you choose to own a property is a very important decision to make and to help you decide on the best choice for your own personal circumstances, we’ve put together this helpful guide.
Difference between joint tenants and tenants in common uk
The key differences between joint tenants and tenants in common are:
If you purchase a property as joint tenants, you can only do so if there are two of you buying a property and both parties want to have an equal share in the property - i.e. 50% each.
When one of you dies, your equal 50% share automatically transfers to the surviving owner, making the surviving party the sole, 100% owner of the property. This is known as the ‘right of survivorship’.
For this reason, a joint tenancy is usually the preferred choice of ownership for most couples who are either married, in a civil partnership or a long-term relationship, or for close relatives who wish to jointly purchase a property together (i.e. a parent and child).
Tenants in common
If you purchase a property as tenants in common, you can own equal or unequal shares in the property and more than two people can have a share - i.e. one person can own 30% and the other 70%, or two people can own 25% each and another person 50%.
Further, buying a property as tenants in common means that you can specifically state who you would like to transfer your share of the property to (the beneficiary) upon your death and unlike a joint tenancy, your share in the property does not automatically pass to any surviving owner(s).
For this reason, a tenancy in common is usually the preferred ownership choice where unequal contributions are made towards the purchase price, or where a parent would like to ensure their share in the property passes to their children upon their death, to avoid hefty inheritance tax payments, for where more than two people are buying, for business acquisitions or where the person or people buying the property are not closely related.
Joint tenants vs tenants in common
The advantages and disadvantages of a joint tenancy are:
|Straightforward||No definition of unequal shares|
|Less paperwork||Both owners need to agree on to a sale|
|Good for couples||Children may lose out on inheritance|
The advantages and disadvantages of tenants in common include:
|Clearly defines unequal shares||Can be more complicated and costly|
|Free to sell your share without approval||Can involve more paperwork|
|Children's inheritance can be secured||Not good if one owner dies intestate|
Does a Will override joint tenancy?
No, a Will doesn’t usually override a joint tenancy. This is why it’s vitally important you do not choose a joint tenancy if you want to ensure your children inherit your share in a property upon your death.
Many parents assume that as long as they make a Will, the terms of their Will are legally-binding and will ensure their child’s inheritance is secure, but their child’s inheritance is not secure if their share in a property is held as beneficial joint tenants.
If it is recorded with the Land Registry in the registers of title to your property that you own a property as ‘beneficial joint tenants’ then without a Will, the ‘right of survivorship’ rule applies, meaning that your equal share will automatically pass to the surviving joint owner upon your death, regardless of the terms of your Will.
If you have any doubt at all that your spouse, partner, relative or non-related equal owner will leave their full share in the property to your children upon their death and want to be 100% certain that your share passes to your children upon your death, then you should not buy a property as joint tenants - full stop.
What happens when one of the tenants in common dies?
When one of the tenants in common dies, if they have made a Will, their share in the property will pass under the terms of that Will to the beneficiaries.
However, if the owner did not make Will, they will die intestate and their interest will usually be transferred to a spouse or civil partner under the rules of intestacy up to the value of £250,000. If an estate value is more than £250,000, the children will receive half of any remaining money, but if there are no children, everything passes to the spouse or civil partner.
If the owner was not married or in a civil partnership, then the whole of their estate (including any share they have in a property as a tenant in common) will pass to any children.
Learn more: New Rules of Intestacy Leaves Children Worse-Off
Should I get a Will?
Yes, you should get a Will to make sure that upon your death:
- your estate (money, property and possessions) passes to someone of your choosing
- to avoid paying more Inheritance Tax than necessary
- to allow a spouse or partner to reside in the property after your death
- to protect your share in a property being gobbled up by care fees
- to ensure your children are financially secure and looked after upon your death
Having a professionally prepared Will makes sure there is no room for ambiguity as to who has what when you pass away, and it avoids unnecessary expenses, arguments and headaches for your loved ones.
It’s much cheaper and easier to make a Will online (especially in the current Covid-19 climate) and we highly recommend using professional and affordable online services like Wills.Services to deal with your probate matters.
At the same time as getting a Will, you should also seek advice about setting up a trust as this trust arrangement can then be tied in with your purchase of a property as tenants in common. Details of a trust can then be referred to in the Transfer document which is submitted to the Land Registry upon completion of a property purchase. A restriction will then be marked in the registers of title to the property restricting anyone from selling the property without the terms of the restriction (aka trust) being strictly adhered to.
Does tenants in common affect a mortgage?
Yes. As tenants in common, buyers are allowed to take out an individual mortgage in their sole name, independently and separately from the other owners of a property, to pay for their individual share in a property.
Whereas joint tenancy owners are obliged to share a joint mortgage to fund their joint purchase.
Tenancy in common owners are also able to take out a shared mortgage with the other owners and that makes all of the owners equally responsible for the mortgage, regardless of their share in the property.
If you take out a joint mortgage, you should also take out a joint buildings insurance policy (and contents insurance). This way any party named in the policy will be authorised to deal directly with the insurer in the event of a claim or to request any changes to the policy.
Your mortgage lender will also require that you take out buildings insurance and that they are noted on the policy as having an ‘interest’, and that the buildings insurance policy is put ‘on risk’ from the date Contracts are exchanged.
Note: You are not obliged to take out home insurance with your mortgage lender and so you should shop around to compare the best deals. Also, your credit score can affect getting a mortgage so it’s always best to check your credit score and try to improve it before applying for a mortgage.
In addition to taking out buildings insurance, it’s equally important to take out life insurance to cover your mortgage payments in the event of your death. If you don’t, your loved ones could lose out financially or even lose their home. For more information, see our blog: Do you need life insurance for a mortgage?
Does joint tenancy affect your credit score?
No, as a joint tenancy will only be shown on registers of title at the Land Registry and will not be mentioned on your credit file or affect your credit score.
However, any mortgage used to fund a property purchase will be shown on your credit file. And, if you have a joint mortgage and the other party has a bad credit history, the financial association created by a joint mortgage means that the other party’s name will be noted on your credit file which can negatively affect your credit score.
Does tenants in common affect credit score?
No, buying a property as tenants in common does not affect your credit score and will not be recorded on your credit report.
However, any mortgage will be noted on your credit file and if you have a joint mortgage with one or more of the other owners, if one of them has a poor credit history, this financial association with them can lower your credit rating.