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Tenants in common vs. joint tenants – which one do I have?
More than a third (34% - equivalent to 17 million people) of adults in the UK own a home with another person, but one in four of these are unaware of how much of their home they legally own, according to our new research.
When a property is purchased jointly, the owners can choose to be either “joint tenants” or “tenants in common”. This confirms the type of legal ownership each person has over the property, which, in turn, can affect what happens to the property if the relationship breaks down, or if one owner dies.
The most common type of joint homeownership in the UK is joint tenants, with close to two-thirds of homeowners stating they hold their property as joint tenants. This gives each owner equal rights over the property, as each owns100% of it.
As a result, for joint tenants the ownership of property passes automatically to the other owner when one dies. Their share of the property can’t be passed on to a third party in a will while the other owner is alive.
Tenants in common
Our research shows that only 12% of UK homeowners say that they own their home as tenants in common. With tenants in common, each owner has a fixed stake in the property – which could be 50/50, but doesn’t need to be.
This type of ownership is often seen in cases where one partner puts down a larger deposit when purchasing a home. This means it’s possible for two people to jointly own a home together, with one person owning, say, 70% and the other owning 30% of the property. Because of this, each share of the property can be passed on to a third party in a will while the other owner is still alive.
Interestingly, a quarter of homeowners in the UK are not aware or don’t know the type of ownership rights they have to their home, and are therefore not fully aware of their rights regarding their shared property.
Points to consider
Tenants in common can be a sensible choice when the parents of one or both partners contribute towards their child’s deposit. Tenants in common let the buyers agree to what size stake of the property they will have in advance, and this could depend on the size of the deposit each puts down. It means that if the two buyers later split up, their – and their parents’ – investment is safe.
Being tenants in common can be useful if the owners break up. The financial split may be easier to resolve because the share of property ownership has already been agreed upon, even if the property has increased in value.
Another important point to consider is the impact the type of ownership can have on care costs. Local authorities have the right to recover costs for long-term care from the sale of the property.
For homeowners who are tenants in common, the local authority can only recoup costs from the share of the person who receives the care. If the house is jointly owned, they could recoup costs up to the full value of the property.
What’s right for you?
What do you want to happen to your share of your home when you die? If you’re a tenant in common, your portion of your home will not automatically go to the other owner if you die. Instead, you can leave your share of the property to your children in your will.
On the other hand, if you’re a joint tenant your share in the property will automatically go to the other owner upon your death. It won’t pass to whomever you’ve named in your will while the other owner is still there.
Which one should I go for?
There are benefits to both tenants in common and joint tenants depending on your circumstances.
With more first-time buyers getting financial support from families with their deposit, or putting in their own savings, splitting the ownership as tenants in common lets you protect your share of your home.
However, joint tenants can have the peace of mind that the property will automatically pass on to the other owner if they die, even if they don’t have a will. Both parties also have equal ownership of the property, and therefore equal decision-making power over their home.
I want to change our legal ownership structure
The good news is that it isn’t too hard for you to change your agreement if need be – you can either download the forms from the Land Registry and do it yourself, or get help from a solicitor or conveyancer.
*3Gem Research carried out online interviews with a nationally representative sample of 2,000 people between 29th June and 6th July 2016.
**Figures extrapolated based on ONS UK adult population estimates for 2013 of 50.3m