Introduction to owning property together

However, amongst all the excitement, there is a great level of responsibility that comes with jointly owning property and it is crucial that your title is held in a way that best meets your circumstances to avoid a complex legal situation arising in future.

There are two ways in which you can own property together; either as Beneficial Joint Tenants or as Tenants in Common. As co-owners you need to decide how you wish to hold your property and tell your conveyancer of your decision so that it can be properly recorded.

This is a key decision, as how people co-own property has implications for couples who separate, family or friends who pool resources to buy property together and even married couples wanting to minimise inheritance tax liability.

John E Jones, director and head of Residential Property at Jackson Lees, (Image: Jackson Lees)

Beneficial Joint Tenants or Tenants in Common?

Joint Tenants   

Here, if one of the two co-owners dies, their interest in the property automatically passes to the surviving owner. This happens by operation of law – obtaining Probate will not be necessary. Each owner holds the property jointly – there are no shares as such! Both parties are treated as having equal interests in the property.

Most married or civil partnership couples tend to hold their property as joint tenants. However, this is not compulsory, and couples can opt to hold the property as Tenants in Common.

• If you decide to hold your property as Joint Tenants, it is essential that you understand what could happen later:
• Either tenant can independently sever the Joint Tenancy agreement at any point without the consent of the other(s) by serving a Notice of Severance in accordance with section 36(2) of the Law of Property Act 1925
• Should this happen, the property is then automatically held as Tenants in Common which means the tenant is free to leave their share in the property to whoever they wish.

Tenants in Common     

As Tenants in Common, each co-owner owns a specific share in the property. This can be split anyway you wish e.g., 50/50, 70/30, 90/10. If shares aren’t specified, the law will assume it’s a 50/50 split. You should confirm the shares to your conveyancer.

If the property is sold, each co-owner receives the monetary equivalent of their respective shares e.g., if the property sells for £250,000 and one co-owner has a 70% share, then that person would receive £175,000.

When one of you passes away, your share will pass to the Beneficiary named in your Will. This way, your share can go to whomever you wish, not just the co-owner.

Unmarried couples, couples in a second marriage, business partners or those that have made unequal contributions to the deposit and/or repayments are advised to hold their property as Tenants in Common.

The Importance of a Declaration of Trust

A Declaration of Trust is a legally binding document which outlines what you each own and how the value of the property would be divided should you ever separate or sell the property.

The Declaration details what each tenant has contributed to the property such as the deposit, mortgage repayments and/or the financial upkeep of it. It is especially needed if one person has put in more money than the other.

Without a Declaration stating individual interests and contributions, co-owners could end up facing a complex, drawn-out legal situation to resolve what each person should receive.  

The Declaration is just as important for Joint Tenants as it can manage how a Joint Tenancy can be severed later. Without a Declaration, either tenant can independently sever the Joint Tenancy agreement at any point by serving written notice on the other co-owner(s) and does not need the consent or agreement of the other owner(s) to do so. The co-owner does not even need to get written acknowledgement from the other party that they have received the Notice of Severance, although it is advisable. Should this happen, the property is then automatically held as Tenants in Common which means the tenant is free to leave their share of the property to whoever they wish.

The Declaration can specify in what way a co-owner can change either a Joint Tenancy or a Tenancy in Common in the future thus preventing any nasty surprises.

The vital role of a Declaration of Trust: Case study

This case demonstrates where a Declaration of Trust could have proved invaluable. It involves English cricketer-come-commentator, Geoffrey Boycott

In 1996, Geoffrey Boycott purchased a property with his lover Anne Wyatt. The property was held in a Joint Tenancy with both Boycott and Wyatt agreeing that when either one died, their interest would pass to the survivor.

Ms. Wyatt continued to live in the Sandbanks property alone until she died in 2009. Given their initial agreement, Boycott expected to automatically inherit her interest in the property. This was not to be the case!

In 2007, two years prior to her death, Ms. Wyatt severed the Joint Tenancy, leaving her interest in the house to her niece.

Despite claiming he had no knowledge that the Joint Tenancy had been severed, Boycott lost his case and half the house.

In this case a Declaration of Trust could have prevented the situation Boycott found himself in. Whilst he would not have been able to stop Ms. Wyatt from severing the Joint Tenancy, a Declaration of Trust, entered at the time of the purchase, would have determined how severance would arise in the future ensuring Boycott knew of it at the relevant time and the Declaration would also have stated what shares each would have following the severance.

Moving home is an exciting time and we’re here to chat to you about any questions you might have about the process.

At Jackson Lees we will act in your best interests, helping you every step of the way to ensure your home move is completed on time.  For a no-obligation quote, please give us a call on 0808 302 3682 (also free to call from mobiles) or visit www.jacksonlees.co.uk.

Professional Service

Jackson Lees understands that moving to a new house or flat can be stressful and will provide you with expert, professional and efficient legal advice, ensuring that, whatever your property transaction, it will be as smooth as possible.

What Jackson Lees can do for you…

Three local offices to choose from;

Liverpool: 0151 909 3146

Heswall: 0151 909 4804

Hoylake: 0151 909 3142

Law Society’s Conveyancing Quality Scheme (‘CQS’) accredited

If you are looking to buy, sell or re-mortgage, Jackson Lees can help, contact the team at one of the offices to book an appointment, or to chat through your options, call 0808 302 3682 or visit the website: www.jacksonlees.co.uk