Why The Type Of Co-Ownership You Have Matters

Where you own land and buildings with another person, be it your husband or wife, your siblings or your parents, you need to understand the nature of that ownership. The conveyancer at the time should have explained the two different ways to co-own. However, there are also times in your life when you may want to switch from one to the other.

If you co-own as “Joint Tenants” then on the death of one of you the property will pass to the survivor of you absolutely. The survivor will then own it as if they had purchased the property on their own. This will happen regardless of the contents of any Will you may have made. Either of you can unilaterally change the ownership to a Tenancy in Common without the other’s consent.

If you co-own as ”Tenants in Common” then on the death of one of you, the share of that person will pass according to any Will that they have made, and, if they have not made a Will, then in accordance with the intestacy rules which are in force at the time. You can quantify the share of each of you e.g. one third/two thirds. This option is particularly relevant where you have children from a previous relationship or with rental properties where you wish to apportion the income for tax purposes or if you wish to protect your estate from the effect of care home fees in later life.

It is important for unmarried couples to be aware that if you choose to hold the property as Joint Tenants, when you sell the property you will each be entitled to 50% of the net proceeds of the sale, regardless of your contribution to the property, whether by payment of a deposit, mortgage or for improvement work.

If you chose to hold the property as Tenants in Common you can define the share that each of you is to have and upon the sale of the property, you will each receive your defined share of the net proceeds of the sale. It is also possible to cater for the situation where one of you is contributing a larger share to the mortgage or for improvement work after the property is purchased.

For married couples, in the unfortunate event that you separate after the purchase of the property, there are property adjustment rules which apply to determine how the property should be dealt with, including how the net proceeds of sale should be shared between you, regardless of whether you hold the property as Joint Tenants or Tenants in Common. The Courts can override your present intentions.

The type of ownership can affect how you contribute for your care, the availability of the residence nil rate band for Inheritance Tax and allowances for Capital Gains Tax purposes and what happens on death. It is a good idea to understand how this affects you.

If you want to discuss your personal circumstances in greater detail, please contact our shared ownership solicitors department for a free initial chat.