This is a legal agreement between joint owners of property setting out how they own a property and in what shares.
If you own a property jointly with a partner, friends, family or associates, you can either own it as beneficial joint tenants or tenants in common. The terms have nothing to do with tenants in a landlord and tenant sense.
This means that you do not own a specific share and that if you die your interest will pass automatically to the other owner or owners ("right of survivorship"). Any provision in a Will leaving your share of the property to someone else will be ineffective.
A beneficial joint tenancy comes to an end if the property is transferred to one owner, if it is sold or if only one of the joint tenants remains alive. The joint tenancy can also be brought to an end voluntarily, for example where a new trust deed is entered into, or involuntarily, for example, where an owner becomes bankrupt, in which case the joint tenancy will become severed and the owners will become tenants in common.
A joint owner may sever the joint tenancy at any time by giving notice to the other owner/s. The property will then be held as tenants in common.
Divorce or separation does not result in an automatic severance of the joint tenancy, although the wording of a document filed or served within any proceedings may constitute a notice severing the joint tenancy.
If you own a property jointly as tenants in common, then you own a specific share of the equity in the property. On your death your share of the property passes into your estate to the beneficiary entitled under the terms of your Will or the rules of intestacy, if you have not made a Will. In your lifetime you can make a gift, sell or re-mortgage your share.
If you own a property as tenants in common, it is always advisable to record details of ownership in a Declaration of Trust. This helps to ensure that the joint owners are clear about the specific shares they own, the contributions that have been made to the purchase price, the amount that each party is to pay towards the mortgage (if there is one), how the proceeds should be divided on sale and how to resolve disputes, such as what should happen if one owner wants to sell and another does not.
If you own a property as joint tenants, although there is a presumption that you own the property in equal shares, that presumption can be rebutted by either express evidence, such as a trust deed, or by the parties’ conduct.
The recent case of Jones v Kernott has highlighted the importance of recording the intentions of the parties, who jointly own property, in a Declaration of Trust, not just at the time of purchase, but also when there are important changes to the way the parties conduct themselves in relation to the property.
For example, at the time of purchase there may have been an intention that the parties were to own the property in equal shares, but at the time of separation, although there was no written agreement or Trust Deed, there was a change to the way the parties paid towards the mortgage instalments, so that one party paid all of the mortgage. As a result of this change, the court could "infer" that there was a common intention, due to their conduct, that there be a change to their beneficial interests, so that they no longer owned the property in equal shares.
Traditionally married couples have chosen to own their properties as joint tenants as they do not see any advantage in owning separate shares. This is particularly the case if they want the property to pass automatically to the surviving spouse on the death of one of them.
Where different contributions have been made to the deposit or mortgage instalments, it is still possible to own as joint tenants and many married couples, couples in civil partnerships or living together couples chose to do so.
Other couples chose to hold the property as tenants in common so that they each own a share which reflects the contributions they have made to the deposit or mortgage payments. This may be important where, for example, couples are in a second relationship and have children from a previous relationship, so that they can leave their share of the property to their children in their Will, or where one party has made a contribution significantly greater than the other.
Whether contributions are equal or unequal it is often helpful for the property to be held as tenants in common and supported by a Declaration of Trust as this makes it clear from the start what is to happen when the property is sold or if there is a breakdown of the relationship.It helps avoid disputes and makes the parties feel more secure about the arrangement.Couples may also want to consider entering into a pre-nuptial agreement, post-nuptial agreement or co-habitation agreement for the same reasons.
A tenancy in common may be appropriate for tax planning purposes or to ensure that your share of the equity in the property is not used, after your death to pay for your spouse, partner or civil partner’s care home fees.
It goes without saying that you should make a Will or review any previous Will when jointly purchasing a property or severing a joint tenancy to ensure that your share of the property is left to your chosen beneficiary and for appropriate housing or financial provision to be made for your co-owning partner/s.