Written by Sarah Fiddy, a Solicitor at Spire Solicitors LLP.
At some point in our lives, many of us will decide to buy a property with someone else. Along with all the other decisions to be made during the buying process, it is important to decide how you wish to co-own the property. This decision is important as it can affect how the property is split on a future sale, relationship breakdown or if one co-owner dies. The two options to decide between are joint tenants and tenants in common.
Option 1- Joint tenants
If you own the property as joint tenants, you will own the property in equal shares. Many married couples and some long-term partners choose this option. In the event that the property is sold, you will each be entitled to equal shares of the net sale proceeds, even if one has made a greater contribution. If one co-owner dies, the property will automatically transfer to the surviving joint tenant irrespective of any provisions made in the deceased persons Will.
Whilst this option may appear straightforward and convenient, it will not always be appropriate and should only be chosen after due consideration.
Option 2- Tenants in common
If you own the property as tenants in common, you can agree to own the property in equal or unequal shares. In the event that the property is sold, the net sale proceeds will be split according to the owners’ respective shares in the property. On the death of one co-owner, their share will not automatically pass to the surviving owner, and will instead pass according to the deceased persons Will or in the absence of a Will under the intestacy rules. This option should be considered if either co-owner has a child, the co-owners are unmarried, or the co-owners are making unequal contributions to the property purchase or mortgage repayments.
If you choose to own the property as tenants in common your solicitor will advise you to prepare a Declaration of Trust. This is a legally binding document that records the financial arrangements between the co-owners to ensure that each co-owner receives the same amount back on any future sale. The Declaration can also be used to record other agreed terms.
When buying a property jointly it is also important to think about making a Will to ensure your share of the property is left as you would wish. When a person dies without having made a Will, the laws of Intestacy apply and your estate will be divided accordingly to these fixed set of rules, irrespective of what your intentions actually were.
If you would like any advice on this topic, Wills or any other legal needs please contact Spire Solicitors LLP on 01603 677077.