BUYING A PROPERTY IN JOINT NAMES
The differences between Joint Tenants & Tenants in Common
Purchasing a new property, whether as a first-time buyer, home-mover or as a Buy to Let landlord is probably one of the biggest financial commitments you will ever make in your life.
If you are buying a property as a home to live in as a couple or a buy to let investment with a business partner, it’s essential you choose the right type of joint ownership that reflects your situation.
The type of ownership affects what happens with a property if your relationship with a joint owner breaks down or if one of the owners dies.
Many people are not sure of the differences between Joint Tenants or Tenants in Common which is why confusion can sometimes happen.
For example, many people assume a property will automatically go to their partner in the event of their death or they’ve got equal rights to a property in the event of a divorce.
However, this is not necessarily the case any why you need to carefully consider which type of ownership best suits your personal circumstances and your relationship with your fellow buyers.
For joint borrowers where one party is in a lower tax band, there may be tax advantages to structuring ownership to Tenants in Common as they can determine the shares they own to favour the lower band individual.
Customers considering Tenants in Common should always speak with a suitably qualified tax advisor and take legal advice before making any decisions.
So which ownership type is right for you ?
Understanding the differences between the types of ownership is key and can be summarised as follows:
- Each owner has equal rights to the whole property
- If one joint owner dies, property ownership automatically goes to the surviving owner
- For the property to be sold, both owners must first agree to the sale and any proceeds from the sale are split equally
- A joint owner cannot pass on their ownership of a property in their will
Tenants in Common
- Ownership doesn’t have to be split 50/50: borrowers can own differing shares of the property
- Property ownership does not automatically switch to the remaining owner if one joint owner dies
- Once both owners agree to sell the property, the proceeds are split depending on the number of shares each owner has
- Joint owners can pass on ownership of the property in their will
It’s worth pointing out that you can change ownership type between Joint Tenants and Tenants in Common and vice versa by getting in contact with Land Registry.
- For example, if customers who purchased as Joint Tenants divorce or separate and then want to leave their share of the property to someone else, they can switch to Tenants in Common
- Conversely, if Tenants in Common get married and want to have equal rights to the whole property they can request a change to Joint Tenants
During the house buying process your chosen Solicitor will discuss your preference regarding placing the property to be purchased into either Joint Tenants or Tenants in Common.
Please note this article is for general advice only as Manchester Mortgages does not give legal or tax advice – as noted above always discuss your personal requirements with your chosen Solicitor or Accountant.
For all your mortgage requirements please contact Manchester Mortgages on 0161 706 0242