In England and Wales, property can be owned jointly by up to four people, although it is common for ownership to be shared by just two. There are two types of ownership: as joint tenants or as tenants in common. The distinction has important implications, particularly in the context of wills and inheritance.
Most solicitors will treat shared ownership between married couples, civil partners and people in long-term relationships as a joint tenancy. Unless there are explicit reasons for doing otherwise, this is how the ownership will be registered with the Land Registry. The concept of a joint tenancy is that the co-owners are deemed to own the whole of the property, not in individual shares but as a totality. To the layperson, this may sound like a fiction but it has important legal status.
This form of ownership is usually selected for people between whom the relationship is more casual, although it is by no means obligatory. The co-owners are allotted specific shares in the property. The proportions can be as unequal as you wish. Sometimes a mortgage lender may require shares to be apportioned according to the income levels of the owners or the amount each contributes to the deposit. The co-owners in a Tenancy in Common enter into a legal agreement under a document called a Declaration of Trust, which is recorded at the Land Registry. The parties can fund the purchase with a joint mortgage or arrange their own separate loans.
During the co-ownership, there is no practical difference between the two types, but if one owner dies or the property is to be passed on as an inheritance the distinction becomes important.
When one joint tenant dies, according to the law, the surviving tenant assumes full ownership, because that is what they are already deemed to have. Nothing passes from one to the other, because the ownership was never divided into shares. This means the laws on inheritance tax do not apply as nothing has been transferred. The deceased will need to be removed from the Land Registry’s records but this is a purely administrative exercise. The property remains in the sole possession of the survivor.
If the property is owned by tenants in common, when one of them dies, their share of the property becomes part of their estate and doesn’t automatically pass to the survivor. Therefore it is essential that each tenant’s will makes explicit provision for their share to be transferred to the surviving tenant. The rules of intestacy – which means dying without a will – usually award the share to the surviving spouse or partner but it’s unwise to rely on this. Making provision in your will is the safest way to ensure that your wishes are carried out.
To change from a joint tenancy to a tenancy in common your solicitor will arrange a severance of joint tenancy, also known as a deed of severance. It can be done without the agreement of the other party. The process is merely an administrative one and if you don’t have a solicitor, then there are plenty of legal services providers, such as https://www.parachutelaw.co.uk/severance-of-joint-tenancy Parachute Law, who will be able to do this quickly and efficiently.
There are many reasons apart from tax considerations why you might wish to convert your ownership to a tenancy in common, such as reducing liability for residential care home charges or providing for your children should the survivor remarry.