If you’re planning to buy a house with someone else, one of the crucial decisions you need to make is how you will own the property.
Director Anne Leiper explains the differences between being joint tenants and tenants in common, and why this is important for both married and cohabiting couples.
House-hunting as a couple is an exciting time, whether you are searching for that first home together, a bigger home for your family, or downsizing after the kids have flown the nest (finally!).
Joint Ownership of Your Family Home
When you buy a property with someone else, you need to choose between two forms of joint ownership. These are Joint Tenants and Tenants in Common. They apply regardless of whether you are married, in a civil partnership, or unmarried. Both these two types of ownership give the owners rights of occupation in the property, whether you are married or unmarried. They also apply whether you buy the property outright or take out a mortgage.
The differences between Joint Tenants (JT) and Tenants in Common (TIC)
There are important differences between the two types of joint ownership.
As a Joint Tenant (JT), you:
- automatically own the property outright if the other owner dies
- cannot pass on your part of the joint ownership to anyone in your will
As Tenants in Common (TIC), you:
- can each own different proportions of the property
- do not automatically get the property if the other owner/s die
- can leave your share of the property in your will
Differences for married or cohabiting couples
For many couples, this issue of Joint Tenants or Tenants in Common doesn’t really raise its head until the relationship breaks down and they decide to split up. When separating, most couples do not want to give their property to the other half. They also don’t want the property to be passed on to any future partner and their family, excluding children from the first marriage.
- For married couples, getting a divorce gives you rights over how matrimonial property and financial assets are divided between you.
- For those in a civil partnership, the dissolution of your civil partnership also provides rights over how your property and financial assets are divided between you.
- For unmarried couples who are cohabiting, it’s a different position. How assets are divided will primarily be dictated by how you own the property, either as:
- Joint Tenants, or
- Tenants In Common with a Deed of Trust
This can also be supported by a cohabitation agreement to direct the division of assets at the time of separation.
What is a Deed of Trust?
A deed of trust is a legal document that lays out what proportion of the property each one owns. You can opt in a deed of trust for 50% as Tenants In Common, or a different percentage split to reflect your individual contributions. You can’t use a deed of trust if you are Joint Tenants.
What is a Cohabitation Agreement?
A cohabitation agreement lays out:
- What you each brought to the relationship in terms of financial assets
- What you may have contributed since you started living together
Should you split up, these details can be taken into account in any separation financial agreement, safeguarding your assets for both you and your children. This should also be reflected in any deed of trust in respect of the property ownership.
What happens when we split up?
If your marriage, civil partnership or relationship breaks down, you need to consider changing your ownership status if you hold the property as Joint Tenants. This applies whether you intend to sell the property or not.
This means a change from Joint Tenants to Tenants In Common. To make the change from being Joint Tenants to Tenants In Common, you need a “notice of severance”. When you sever the Joint Tenancy, you and your wife/husband/partner would then hold the property as Tenants In Common.
At LGFL, we generally advise divorcing couples to sever a joint tenancy but this is very much dependent on your particular circumstances, and you need to take legal advice.
Who pays the mortgage?
Bear in mind that when you co-own your home and take out a joint mortgage, you are both responsible for paying that mortgage, even if one of you moves out. This applies whatever your status - married, civil partner, or unmarried.
Sole Ownership of Family Home
Not every couple co-own their home. The property can be held in one partner or spouse’s name, so they are the sole owner. This will mean that only one name appears on the title deeds of the property.
Sole ownership and married couples
If you are married or in a civil partnership and you split up, the non-owner of the family home needs to register their spousal rights of occupation, aka home occupation rights. This is to prevent a sale of the property whilst matters are being resolved.
Home occupation rights allow you to stay in your own home after you separate, even if you do not own the property. You can claim these right within your divorce / dissolution proceedings, and how the property is dealt with be resolved in your financial settlement.
Sole ownership and unmarried / cohabiting partners
If as a non-married / cohabiting couple you split up, and you don’t own the family home, as a cohabitee you have no rights of occupation. That’s why having a cohabitation agreement in place is such an advantage, as this can lay out what happens in the event of a separation.
If there is no cohabitation agreement in place, as the non-owner you would need to establish what is known as a “beneficial interest” to establish any interest in the property. A beneficial interest usually means you’ve put money into the purchase and/or contributed to the mortgage of your shared home. You should keep proof of this in a safe place so you can show a court or your family lawyer to prove your contributions.
Alternative property registrations
Sometimes, you may need to get legal advice on alternative registrations against the property title. This is to protect your claim in respect of the shared home whilst your separation proceedings are happening. Alternative registrations can be complex, so always get legal advice from your family lawyer such as LGFL.
Inheritance For Children
Many parents want their children to inherit a share of the family home, but don’t realise that their choice of joint ownership way back when they bought the property will affect who can inherit part or all of it!
Being a Joint Tenant basically means that you BOTH own the whole house. It’s not a 50/50 share as such. So, when you die, the surviving co-owner will automatically own the whole of the property, under the “right of survivorship”. You cannot leave a share of the house to anyone, including children from a previous relationship.
As Tenants In Common, however, your deed of trust lays out exactly what share of the property you own. Tenants In Common can leave that share to anyone in their will when they die, including your children from a previous marriage or relationship.
Still Confused? Contact LGFL
Call us to discuss your ownership status issues either as new buyers or a separating couple - we’re here to help. Our fixed fee one-hour consultation gives you plenty of time to discuss what’s required, from pre-nups and cohabitation agreements to separation proceedings and notices of severance.
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