While most joint mortgage applications are from couples buying a home together, there has been a rise in recent years of friends clubbing together to buy a property. When you buy a property with someone else, you’ll need to choose the right co-ownership structure for you.
Joint tenancy and tenancy in common are the two main property ownership structures in the UK and each has pros and cons you’ll need to consider.
This guide explains everything you need to know about both…
What is joint tenancy?
Joint tenancy is the most common option of ownership for buyers purchasing a home with someone else, usually a partner.
Under joint tenancy, all buyers own the property equally and have the same rights over the home, regardless of how much they contribute to things like mortgage payments, bills, and maintenance.
Joint tenants also have what’s known as right of survivorship, which means when one person passes away, the ownership of the property automatically passes to the surviving owner. When the surviving partner passes away, they are free to leave the property to whomever they choose.
What are tenants in common?
A tenancy in common is another form of joint ownership, but sees each buyer own a specific share in the property.
That could be an equal 50/50 split, or shares can be divided up in a different way.
The ownership split can also be changed at any time should the circumstances of the owners change.
For example, if one owner secures a new job and is able to pay more towards the mortgage, they may wish to have their share increased to reflect that. With tenancies in common, an owner’s share can pass to a separate beneficiary rather than the other owner upon death.
What is the difference between joint tenancy and tenancy in common?
Joint tenancies and tenancies in common have several key differences you’ll need to consider:
Joint tenancies at a glance
Tenancy in common at a glance
Equal ownership of the property
Shares in the property can be divided up in a non-equal way
Equal rights over the property
Divided rights over the property
Ownership passes to joint owner upon death
A share in ownership can pass to other beneficiaries upon death
Can joint ownership be changed?
It’s possible to change a joint tenancy to a tenancy in common and vice versa.
Changing a joint tenancy to a tenancy in common
In England and Wales, you must complete the SEV form on the gov.uk website and send it along with supporting documents to the Land Registry.
In Scotland, the property’s title deeds will need to be changed and you’ll require a solicitor to do this.
Changing a tenancy in common to a joint tenancy
To switch from a tenancy in common to a joint tenancy, you’ll need to complete a document known as a ‘trust deed’ and send all required paperwork to the Land Registry. In Scotland, the property’s title deeds will need to be changed and you’ll require a solicitor to do this.
What is a deed of trust?
If you’re considering purchasing a property as tenants in common, you’ll need a solicitor to draft a deed of trust between you and the person you’re buying with.
The deed of trust can include:
- How much money each person paid towards the purchase deposit
- What happens if one person is unable to pay their share of the mortgage
- What happens if one or both owners wish to sell the property
- What happens to each owner’s share when they pass away
- How any equity in the property is divided up when it’s sold
Deeds of trust can be especially useful when buying with someone who isn’t your spouse.
If you’re buying with a spouse or partner and would prefer a tenancy in common arrangement, you could consider a cohabitation agreement rather than a deed of trust. This would outline who pays what in bills, mortgage payments and maintenance costs and how things like bank accounts and other major assets are handled, as well as property.
Joint tenancy vs tenants in common
There are several pros and cons of both joint tenancies and tenancies in common and you’ll need to discuss these with the person you’re planning to buy with:
The benefits of joint tenancy
- You’ll be able to combine your salaries, giving you greater borrowing power
- Owning a property equally with someone else can mean less of a burden for each owner
- Right of survivorship means each owner knows the property passes to them should the other owner pass away, meaning greater security
Things to consider
- If you’re buying with a partner and the relationship breaks down, the amount of money each person has put into the property isn’t recognised as the shares are equal
- If one person wishes to sell the property in the event of a relationship breakdown, they’ll need the other owner’s agreement to do so
The benefits of a tenancy in common
- Each owner owns a share of the property that belongs solely to them and can reflect the amount of money they put in
- In the event of a relationship breakdown, having a deed of trust outlining what happens to each person’s share can reduce risk
- Each owner’s share can be given to a separate beneficiary upon their death if they wish
Things to consider
- A deed of trust outlining each owner’s financial interest in the property will need to be drafted for a tenancy in common – meaning more costs
- Each owner will need to draft a will if they wish their share to go to a beneficiary rather than the other owner upon their death
- You should always seek independent legal advice