In England & Wales, joint ownership of property is based on trust law, not land law – the joint owners are treated as being trustees of the property, which they hold on trust for themselves, in the same way as “real” trustees would hold property on trust for the beneficiaries of the trust.
There are two ways in which jointly-owned land can be held – as “tenants in common” or as “joint tenants”. These terms have nothing to do with tenancies or leases, but are simply a legal shorthand to identify what the joint owners’ rights are and how the property would be dealt with if one joint owner were to die.
As tenants in common, the owners can own the property in equal or unequal shares and can leave their respective shares to whomever they wish by their Will. As joint tenants, they are said to have “undivided shares” and, if one dies, the survivor will automatically become the beneficial owner of the whole property.
Either method of ownership can be appropriate, depending on the circumstances: if the owners have contributed unequally to buying the property, they may want to own it unequally; or if one or both of the owners has dependents from a previous relationship, they may want those dependents to receive their share of the property on their death. In these circumstances, a tenancy in common is appropriate. If those factors do not apply, the owners may want to ensure that the survivor of them owns the property outright, without the need for a grant of probate, so a joint tenancy keeps things simple.
Whichever method is used, but especially for a tenancy in common, unless the owners are married to each other – when family law would apply – it will often be appropriate for the owners to enter into a “declaration of trust”, setting out the terms of their joint ownership; in particular –
- Specifying whether they are joint tenants or tenants in common
- If tenants in common, stating what their respective shares in the property are
- Stating whether the consent of both owners is required before the property can be sold – otherwise, because of trust law, either owner can insist on the property being sold against the other owner’s wishes, which may well not be appropriate if the property is intended to be their home
- Specifying who should be responsible for what outgoings and in what proportions; for instance, one owner may have invested their savings – or divorce settlement – in buying the property while the other is funding the purchase by way of a mortgage loan, and should indemnify the first against liability for the loan repayments. Other outgoings might also be appropriately shared unequally
If you are buying a property jointly with someone else, speak to us about what type of joint ownership is appropriate and whether you should enter into a declaration of trust.
Please note, first, that the above only applies to properties in England or Wales, second, that though the above assumes two owners it is even more important to consider these issues when there are more than two owners, as the risk of conflict is significantly higher.
29 August 2017