When you purchase a property with someone else, you must decide how you wish to hold the property – either as beneficial joint tenants or tenants in common, in equal or unequal shares.
If you own the property as beneficial joint tenants, then in effect you each own it indivisibly. If one of you were to pass away, the property would pass automatically to the survivor, regardless of any provision you may have made in your Wills or under the rules of Intestacy. The only document required to change ownership to the survivor’s sole name would be the Death Certificate.
This is the most common arrangement for a husband and wife and the most straightforward, but it may not be very tax efficient for tax purposes. Your Accountant should advise you on this or our Private Client team would be happy to help.
The alternative is a tenancy is common where you each have a clear and specified share. You might have equal shares or unequal shares according to the contributions you have made to the purchase price. Each of you is, in theory, free to sell your share, to mortgage it or give it away. Your share would pass under the terms of your Will or under the rules of Intestacy on your death, rather than passing to the survivor of you automatically.
A tenancy in common is more usual for an unmarried couple or business partners. It may also be used though by a husband and wife who want to arrange their affairs so that their shares pass to their children or wider family. This might be for tax planning and it would be an issue requiring specialist advice from our Private Client team or from your Accountant.
We are often instructed that the property is to be held as beneficial joint tenants even though unequal contributions are being made to the purchase price. If this is the case, then the person putting in more money to purchase must appreciate that they are effectively making a gift to their joint buyer. This is because it will be deemed that if there is a dispute, and a notice is served to sever the joint tenancy (bring it to an end), this would leave you each owning equal shares of the capital in the property, irrespective of your original contribution to the purchase price.
Usually, where there is a dispute, you would be advised to sever the joint tenancy. The effect of that is that the Courts will consider that you own an equal share of the proceeds of sale and that each share then passes under your Will or Intestacy, rather than automatically to your co-owners.
However, that might raise complications from a practical point of view – if one party wanted to sell and the other wanted to remain in the property, a costly application would have to be made to the Court to ask the Judge to make an Order for sale of the property.
It is always much easier to be clear at the beginning – this is why we would recommend a Declaration of Trust if you are not contributing equally to the purchase price. A Declaration of Trust is a straight-forward mechanism for confirming how a purchase purchase has been funded, who has invested what funds and what the intentions are for any division of capital on any onward sale. You would hold the property as tenants in common in unequal shares to represent the financial contributions you have made supported by a Declaration of Trust.
The Declaration can also cover other issues – expected contributions to the running costs, and what arrangements there would be between you about selling the property should you separate.
This article was prepared by Marie Moore, a Licensed Conveyancer in the Property team at WBW Solicitors in Launceston. If you would like to contact her to discuss anything mentioned in this article or for any property related query, please call 01566 771117 or email mariemoore@wbw.co.uk.
WBW Solicitors has offices in Axminster, Bovey Tracey, Brixham, Chard, Exeter, Exmouth, Honiton, Launceston, Newton Abbot, Paignton, Seaton, Sidmouth, and Torquay.
This article is for general information only and does not constitute legal or professional advice. Please note that the law may have changed since this article was published.
