Jointly Owned Property
This note covers important points that arise when any property is bought by more than one person.
- two methods of owning property jointly
- why you should record your decision on paper or in a suitable legal agreement
If you buy any property e.g. house or flat, jointly with somebody else, such as a Husband/Wife, a (Civil) partner, friend or a relative, it is IMPORTANT that you agree with your co-owner(s) on:
- who is to inherit the property if an owner dies;
- the contribution that each person will make to the price;
- the contribution that each person will make to any future running expenses, including mortgage repayments;
- the split of the net proceeds between the co-owners when the property is sold and how the value of any improvements is to be dealt with
You should record your agreement in writing. The arrangement can usually be altered at a later time by agreement between all the joint owners. Similar rules apply to joint bank accounts or joint purchases of items such as cars, furniture, computer and TV equipment, etc, not just to a house or flat.
With a written record, you can avoid an unintended outcome in the event of any dispute with your co-owner(s) when you come to dispose of the property, e.g. to sell/buy something else, or on divorce/break-up of a relationship, or on death.
Why is a written agreement so important?
A large number of disputes and court cases turn upon the intention of co-owners of the property. This is particularly relevant where the financial contributions of the named owners are not the same or where somebody contributes to the purchase price or purchase expenses but is not named as an owner on the deeds.
If a dispute arises which cannot be settled, any Court trying to resolve the matter will review the agreement to see what the parties agreed at the time of purchase.
Different presumptions are made by a court in the case of different types of property and different types of relationship. So business partnerships may be treated differently from domestic arrangements concerning the matrimonial home.
Which method of Ownership?
Below are two ways of holding property owned by more than one person – you should decide on the type of ownership suitable for you.
Method 1: Beneficial Joint Tenants
No single owner on their own has a defined share of the property; every person named on the title owns the property jointly. This means that on the death of any owner, the ownership of the whole property automatically passes to the survivor(s). This will happen despite any provision to the contrary the deceased owner has included in a Will, or under the Rules of Intestacy.
This is a typical arrangement with married couples/civil partners or partners in a permanent relationship, who want the property to pass automatically to the survivor.
You cannot transfer your “share” of the ownership separately from the other joint owner(s). If you try to do so, you might in some circumstances convert the joint ownership into a ‘tenancy in common’ (see below).
If you intend to convert the ownership to a tenancy in common, we can help you to do this. It involves giving written notice to any other joint owner(s) and is called “severance”.
Method 2: Tenants in Common
Each owner has a specific share; this can be equal or unequal. The shares are usually stated as a percentage or as a proportion of the whole.
Each person’s share should be agreed and recorded. This may be in the Transfer deed or Lease, e.g. “as tenants in common in equal shares” or “as to one third to X and two thirds to Y”, or in a separate trust deed.
If asked (and sometimes automatically) the Land Registry will place a note on the Property Register of the title. This is called a Restriction. In that case, neither a single owner nor a sole survivor alone can deal with the property.
If you choose to be tenants in common, we strongly recommend that you complete a Declaration setting out the proportion in which you own the property and what the shares will be if the property is sold. We can help to prepare an express declaration which will be conclusive as to the interests of the tenants in common.
Please remember you may need to adjust the sharing proportions if there is subsequent capital expenditure on the property, such as for improvements, and the contributions are not the same as the original shares you agreed. We recommend recording any agreement is in writing.
Because a tenant in common owns a defined share of the property, it forms part of the Estate of a tenant in common who dies. The share will pass to whoever the deceased chooses if there is a Will. This may include the surviving tenant in common. If the deceased has no valid Will, the share passes under the rules of intestacy. It will NOT pass automatically to the survivor.
Upon the death of a joint owner, because a tenant in common owns a defined share of the property, it forms part of your Estate and will pass to whoever you chose (if you have made a Will), including the survivor or, if you have no valid Will, under the rules of intestacy. It will NOT pass automatically to the survivor.
If the tenants in common are not married (or registered civil partners) it is important for each owner to make a Will that deals effectively with what is to happen to their share of the property after their death.
Where land or ‘real’ property is held by more than one person, all the owners will hold the property on trust. The trust will be what is called a “trust of land.” Under a trust of land, you may hold the property with others either as joint tenants or as tenants in common (as explained above).
There are detailed rules that govern trusts of land. For example, if one of you wants to sell a jointly owned property and the other does not, there are statutory provisions that ultimately allow the Courts to decide what should be done.
If you are the sole owner of a property but another adult is living with you (wife, partner, parent, child), the other person may be able to claim a right to occupy and to make other possible claims. Also, if that other person contributes to the upkeep of the property, (mortgage, household bills, etc) or provides money for, e.g. improvements, or makes some other contribution as a part of a family or other arrangement, he/she may acquire a financial interest in the property or be able to claim a share.
If that is not your intention, then we can advise you how to deal with the situation.
Whatever is agreed should, of course, be recorded in writing and kept with us or in another safe place.
If you intend to allow someone else to live at the property (who is over 17) we need to know. If you are borrowing money to pay for the property, you MUST inform your lender if you intend to allow ANYONE over the age of 17 to live at the property, otherwise than on a temporary basis and strictly as a guest.
PLEASE NOTE that this applies whether you are a joint owner or a sole owner.