Joint Owners or Owners in Shares?
When it comes to owning a property with a partner there are two different options. You can own the property jointly as ‘Joint Owners’. This is also known as ‘Joint Tenants’. Alternatively, you can own the property as ‘Owners in Shares’. This is also known as ‘Tenants in Common’.
Realistically these legal terms have nothing to do with the leases or tenancy agreements. Instead, they are legal terms for the main two ways that you can jointly hold property with someone else.
In this blog post, we look at the differences between Joint Owners and Owners in Share to help you understand the best option for you, your partner and the property.
Joint Owners (or Joint Tenants)
When you own a property with another person, this means that you both have equal shares in the property. Whether you put the same amount as each other into the property or different amounts it does not matter. The result is that you both have equal shares in the property.
This means that when one of the joint owners dies, their share automatically goes to the other joint owner. This is regardless of what the will of the diseased states.
The property will not form part of the deceased estate for Inheritance Tax purposes. Any bequests of the share in the property will also have no effect. When the remaining owner of the property dies at a later stage the property will go as directed in their will, the will of the surviving owner. This may not be the same people as the first joint owner
Owners in Shares (or Tenants in Common)
The difference with Owners in Shares is that the property can be split to equal the amount paid by both parties. For example, it could be a 70% / 30% share for example, or even the 50% / 50% if both parties pay the same amount for the property or that is what you choose. In some cases, one party will pay off the mortgage or complete improvements on-going and therefore have a 50% / 50% split even though they paid in less at the beginning.
In the case of Owners in Shares, you may choose for one person to buy out the other persons share. This should be at a price agreed between both parties, or assessed by a valuer.
Declaration of Trust
You also need to consider the future. If one of you dies then the shares of the property will not automatically go to the other owner. Instead, it will go to whoever is named in the will of the deceased. If there is no will in place the property may go to the deceased’s spouse, children or other family members.
Of course, it is possible to leave your share of the property to the other owner in your will. However, matters around this can become more complex when there are other children and relatives that you want to leave respective shares too.
We would recommend a ‘Declaration of Trust’ as a document that needs to be prepared separately. This will help you ensure the property is not sold until either the owner dies or wants to sell the property.
If you would like support in choosing between being Joint Owners or Owners in Shares then please call us now. We would be happy to help.
Alternatively, why not try our online instant conveyancing quote tool.