Holding property as a joint tenancy or as tenants in common – what is best for you?

Where land is owned by two or more people, they each have a simultaneous interest in the land and are known as co-owners. There are two ways in which co-owners may hold property, either as a joint tenancy or as tenants in common.

Under a joint tenancy, each tenant has an indivisible share in the property and all of the tenants are equally entitled to the whole property, i.e two joint tenants hold a 50% share each, four joint tenants hold a 25% share each.

The key feature of a joint tenancy is the right of survivorship, which means that upon the death of one co-owner, that co-owner’s interest in the property will pass to the surviving co-owners by law. For example, if one of three joint tenants were to die, the surviving two would see their interest automatically increase from a third to a half share. No action is required to vest the property in the surviving co-owners, as they are already entitled to the whole of the property. The deceased co-owner’s interest in the property cannot be inherited by the deceased’s heirs, as the deceased owner did not own a distinct share of the property. If a joint tenant has made a will that purports to leave their interest in the property to a beneficiary, the disposition will be ineffective.

If the right of survivorship applies, the sole surviving co-owner will own all of the property, and on their death the property will form part of their estate. The sole survivor will also be entitled to sell the property as they have become absolutely entitled to both the legal and the equitable interest.

In some situations, joint tenants may wish to “sever” their joint tenancy and give themselves separate shares in the property. this is frequently the case where married couples holding the former family home as joint tenants are separating and wish to retain control over their interest in the property.

If co-owners hold the property as tenants in common, they each have a distinct beneficial share in the property. Solicitors often advise co-owners to expressly indicate the proportions in which they hold the property, rather than leaving this to be implied from the circumstances and the financial contributions made by each co-owner., as disputes often arise when co-owners do not make an express declaration of their respective beneficial interests in a property.

The method by which a joint tenancy of the equitable estate is converted into a tenancy in common is through the process of severance. Severance cannot be undertaken in relation to a legal estate because a legal estate must be held by joint tenants. the severing of the equitable estate should be recorded with HM Land Registry at the earliest opportunity.

If you would like to talk to one of our specialist family solicitors about your separation and the impact it may have on your finances, including your interest in the former family home, contact us on 01234 889777 for a free consultation.

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