When property is owned by more than one person, the owners can either hold it as ‘joint tenants’ or ‘tenants in common’. These terms distinguish how the value of the property is shared and also dictate what will happen to that value, should one co-owner die.
Joint Tenants
If owned as joint tenants, the value of the property is held in a global share, with each party to the couple being entitled to the value of 50%.
If one of the co-owners were to die, their 50% share would pass automatically to the surviving co-owner, irrespective of whether the deceased had made a Will, or not. This is called ‘passing by survivorship’.
Husbands and wives will often hold property as joint tenants, as they want the other to inherit their respective share of the property in event that one of them should die.
Tenants in Common
Where property is held as tenants in common, the individual entitlements are effectively split into separate shares, which stops the individual shares from passing to co-owners on death by survivorship.
Instead, the deceased’s share in a property would either pass in accordance with the terms of their Will, or if they didn’t leave a valid Will, under the intestacy rules.
As it is believed that around 60% of the UK population have not made a Will, it is essential that all co-owners make a Will, if they hold property as tenants in common, to ensure that any unexpected consequences do not arise upon death.
Holding property as tenants in common allows property to be held in unequal shares, so is ideal where co-owners are making different contributions. Where the property is to be held in unequal shares, it is essential that a Declaration of Trust is entered into. This is a deed which sets out how a property was purchased and what should happen to any net sale proceeds, in the event that a property is sold. The ensure that the terms of a Declaration of Trust correctly reflect the agreement reached between the co-owners, it should be drafted by an experienced solicitor.
If you would like further advice on property co-ownership, call Milne Moser Solicitors on (01539) 729786 or email solicitors@milnemoser.co.uk
