In law, there are two ways for joint buyers to own a property:
Joint Tenants - if you sell the property, the sale proceeds will be split 50:50
Tenants in Common - if the property is sold, the sale proceeds can be either split equally or unequally and a Trust Deed can be used to set out proportions owned by each party.
What happens if one buyer wants to sell and the other doesn’t?
Joint Tenants - if only one of you wants to sell, they cannot do so without applying to the court to force the sale against the wishes of the co-owner. The Court may or may not agree.
Tenants in Common - as soon as one party wants to sell the other has no choice. In addition, a Trust Deed can have provisions written into it that state what happens should one owner want to sell - such as, the owner not wanting to sell gets the opportunity to buy the other owner’s share and if agreement cannot be reached within a certain timescale, the property must be sold on the open market and any profits divided according to the Trust Deed.
What happens when you die?
Joint Tenants - on the death of one of the owners, their share automatically goes to the surviving owner, irrespective of whether there is a Will or not.
Tenants in Common – on the death of one of the owners, the share owned by that person does not automatically pass to the other owner, it passes according to the deceased person’s Will or if there is no Will then it passes to their nearest surviving relative under the rules of “survivorship”.
The biggest problem where a property is bought as Joint Tenants is if both owners die at the same time, for example in a car accident. The law assumes the oldest person dies first, and therefore their share is passed to the younger person. This share is then passed on to the youngest persons relatives, either under their Will or, if none, under the rules of survivorship. This can cause a problem because the family of the oldest person could end up inheriting nothing, even if they put in the majority of the purchase price or are the ones looking after
In the case of Tenants in Common, if one party dies, a Trust Deed may show the percentage share of the property they owned but not say who inherits their share. As the deceased’s share does not pass automatically to the surviving partner, it might mean the survivor ends up owning the property jointly with the family of the deceased which may not be what the parties want. To ensure that the deceased’s wishes are carried out, each buyer should make a Will.
Often it makes sense for joint buyers, especially if they are unmarried, and/or contributing unequally to the purchase, to buy as Tenants in Common and enter into a Trust Deed and to both make Wills. In other situations the parties wishes may be fulfilled by simply owning as Joint Tenants, without needing either a Trust Deed or a Will.
Some things to consider are:
Will you be contributing equally to the purchase price
Will you pay the mortgage (if any) and costs equally
Would you leave your share in the property to somebody other than your co-owner
What will happen if you die (including taxation aspects)
What will happen if one of you wants to sell and the other does not
What will happen if you and your co-owner go your separate ways and/or dispute the shares you own in the property.
The potential effect of getting it wrong can be catastrophic, but your solicitor will be able to advise you on these matters to ensure that you and your family don’t encounter any problems in the future.
Luke Almond, Direction Law
0800 158 8281