When you buy a property with someone else, you will enter into a legal agreement which sets out who owns the property and what percentage of it they own.
If you buy a property with someone else, you’ll need to decide how you want to own the property together. We explain the two different types of property ownership and how they work.
Who owns my property?
Who owns your property may sound like an obvious question but it is probably one of the most important ones you’ll answer when in the process of buying a home.
When you buy a property with someone you are entering a legal agreement with them. You can choose to jointly own the property or split it into different proportions i.e. 60/40 or 30/60. Your decision is kept on record by the Land Registry.
You can find out who is the registered owner of your property via the Gov.uk website
What are the different types of property ownership?
There are two main types of joint residential property ownership, you are either: joint tenants or tenants in common.
What is the difference between joint tenants and tenants in common?
The difference in ownership of a property will normally only manifest itself when either:
The property is sold
or
If one of the owners dies
or
The owners are in a relationship and that relationship ends
These are the key moments when it will make a big difference as to how the property is held.
Joint tenants vs tenants in common
The question of whether to register the property as joint tenants or tenants in common needs to be answered before a transfer deed can be registered.
A transfer deed is a legally binding document that transfers ownership of a property. It is registered at the Land Registry, and sets out who owns the property.
What type of ownership you choose will depend on:
The relationship you have to and with the other buyer
Whether you have contributed more or less to the purchase – such as a putting down a larger deposit
Other legal concerns or dependants outside the relationship – for example if you want to leave the property to a dependant or relative who doesn’t live with you
It’s important you understand the legal implications of the choice you make. You can change your mind at a later date, but this can be expensive and time-consuming.
What is a joint tenancy?
This gives both buyers an equal share in the property, if you are a joint tenant you will own the property 50/50 with whoever you are buying it with.
Joint tenant – pros and cons
The pros of being a joint tenant
Being a joint tenant is the simplest form of joint property ownership
Joint tenancy is a popular choice for those buying a property with a relative
A couple in a relationship may also prefer to be joint tenants
Legal fees are much lower because it is less complex as fewer documents need to be drawn up
There is no actual joint tenancy agreement which means there is less legal work involved.
However, a joint tenancy may not be suitable for everyone.
The cons of being a joint tenant
Being a joint tenant may not suit certain types of joint ownership. The most obvious examples are:
If someone is buying an investment property with another buyer, or
If a couple are purchasing a property together but one has put down substantially more money for the deposit
Selling property if you are joint tenants
Selling a property requires both owners to agree. This is because the Land Registry transfer needs to be signed by all owners.
If the owners don’t agree – which can happen in the event of a relationship breaking down – then a court order may be necessary. Whatever happens the proceeds of the sale will be split equally.
What happens to joint tenants if one of them dies?
Joint tenants have the Right of Survivorship.
This means that in the event of the death of one of the owners, the property automatically passes to the surviving person and they become owner
The surviving partner of a couple who are tenants in common will not necessarily have this right
What are tenants in common?
This type of property ownership means the owners have a different share of the property.
So, if you buy a property as tenants in common you can choose how you want to split ownership in proportion to your contributions.
This is called a distinct beneficial share in the property
This will usually be based on what each co-owner has contributed to the purchases of the property
This could be a larger deposit or paying a greater share of the mortgage
Pros and cons of tenants in common
Pros of tenants in common
Tenants in common might be a more suitable arrangement if the property purchase is for investment purposes
It might be more suitable if one of the buyers has contributed significantly more money to the purchase than the other
It might also suit a couple in a relationship who are not married or who have children or dependants from a previous relationship
Rights of tenants in common
There are no strict rules and owners can choose whatever share they like, even a 5/95 split.
Just because you may have a smaller ownership share does not mean you have fewer rights to the property, you can still live in the property and be able to access/use all of it, even if you just own 30% of it.
Cons of tenant in common
It is a more complex form of property ownership so you will pay higher legal fees
You may want to have other legal agreements drawn up like a Deed of Trust
If you are in relationship with the other owner it could cause resentment over the long term, in which case a joint tenancy may be more appropriate
Tenants in common and a Deed of Trust
A Deed of Trust, also known as a Declaration of Trust, is a document that solicitors often encourage owners who are tenants in common to sign.
It’s not an actual legal requirement, but it sets out the financial interests and responsibilities of both owners.
A couple who is not married or in a civil partnership is often encouraged to sign a Deed of Trust. This can protect the rights of both owners if the relationship breaks down.
It can also take into account who gets what if the property increases in value – this could also take into account if one owner spends a considerable amount of time and money renovating the property.
The deed could also include a clause if the owners cannot agree on selling the property, should their relationship break down
Selling a house if you are tenants in common
You will still both need to agree to a sale of the property if you decide to sell, as both people who own the property both need to sign the transfer deed.
When the property is sold, co-owners will get a share based on the percentage share that each one holds
Tenants in common can sell their share of the property to anyone, and there are no rules that prevent certain sales
What happens when one of the tenants in common dies?
There is no Right of Survivorship when one of the tenants in common dies.
Their share of the property passes to their estate
Tenants in common who want their co-owner to inherit their share of the property will need to make a Will that expresses this
How to calculate your share if you are tenants in common
Your share of a property will need to include all financial contributions made to the property.
You would need to speak to a solicitor who would be able to draw this up and have it included in a Deed of Trust.
Joint tenants or tenants in common? How to find out
If you are unsure as to whether you own your property as a joint tenant or tenant in common you can check your property’s deeds online at Gov.uk via check your ownership details.
This guide is intended as information, you should always get legal advice when deciding on either type of property ownership.