Owning a property jointly
Last reviewed on 09 June 2016
Ways to jointly own a property
If you jointly own a property with someone else, you can either own it as joint tenants (sometimes called beneficial joint tenants) or as tenants in common. In Scotland, joint tenants are called joint owners and tenants in common are called common owners. In Northern Ireland, tenants in common are also sometimes known as coparceners.
Before deciding how you want to jointly own a property you should consider the following:
•Do you want equal shares in the property?
•If you died, who would you want to inherit your share of the property?
•If you had to go into care, what would happen to your share of the property?
Joint tenants own equal shares in a property. If you die, the other owner/s automatically inherits your share of the property. This overrides anything you may say in your will, so you cannot leave your share of the property to anyone else. But note that your share of the property still counts as part of your estate so there could be Inheritance Tax (IHT) to pay.
Most married couples own their home as joint tenants. If you are joint tenants and your spouse dies, you automatically inherit their share of the property (and in this case there is no IHT to pay because gifts between spouses and civil partners are tax-free under the IHT system).
But if you are not married, while the surviving partner automatically inherits the property there may be IHT to pay if the deceased's estate is worth more than their tax-free IHT allowance.
If you do not want your share of the property to go to the other joint owner/s if you die, you should buy the property as tenants in common. There are several reasons why you may want to do this. For example, if you have children from a previous relationship you may want your share of the property to go to them.
Another reason you may not want your partner to inherit your share of the property, is that this could increase the value of their estate so that when they die their heirs have to pay IHT. For example, if you and your partner have children, you could leave your share of the property to your children so that when your partner dies only his/her share of the house is counted as part of his/her estate.
However, if you're married or in a civil partnership you inherit your partner's unused IHT tax-free allowance (£325,000 in 2015/6 and frozen at this rate until 5 April 2018). This means married couples and civil partners can pass on a total of up to £650,000 in 2015/6 on the second death with no liability to IHT.
Tenants in common
If you own a property as tenants in common, each party owns a share of the property. You can have equal shares or one of you could own more of the property than the other. If one of you dies, your share of the property goes to whoever you have left it to in your will (or in accordance with the intestacy rules if you have made no will).
This arrangement can work well if you have put different amounts into the property. For example, one of you may have paid 70% of the deposit and the other 30% and you want this reflected in the ownership documents. Then if you later decide to sell up and go your separate ways the tenants in common document clearly states who is entitled to what.
There are several other advantages of being tenants in common.
•You can leave your share of the property to whoever you like. For example, you may buy with a friend but if you die want your share of the property to go to a family member. Another reason for doing this may be that you want your children from a previous relationship to inherit your share of the property.
•You and your partner can minimise any IHT bill you leave. For example, if you each leave your share of the property to your children rather than each other, on the first death half of the property will pass to your children. This means the surviving partner's estate will be worth less than if they had inherited the deceased's share of the property and this will keep down any potential IHT bill. However, see comments above about married couples and civil partners inheriting the IHT tax-free allowance.
•If your partner survives you, now owning the property jointly with say your children, and then has to go into care, it might be the case that only their share of the home will be taken into account when they are assessed for care fees. However, be careful about giving away part of your home to try and avoid care home fees. It is by no means definite that you will avoid the fees and you may be accused of giving away assets to claim financial assistance. Always take professional advice before action of this sort. For more on this topic visit the FirstStop care advice website at www.firststopcareadvice.org.uk.
Joint tenants or tenants in common?
When you buy a property with someone else, your solicitor will discuss the merits of buying as joint tenants or tenants in common. Before the property can be transferred to you, you will have to sign a Land Registry document stating if you will be joint tenants, tenants in common in equal shares or tenants in common with specific unequal shares in the property.
Switching from joint tenants to tenants in common
If you are a joint tenant but would like to become a tenant in common you can do this by writing to the other joint tenant/s saying you want to sever the joint tenancy and be tenants in common instead (known as a notice of severance). Next complete form SEV (or form RX1) both available from Gov.uk and send the form to the Land Registry.
You can also switch from tenants in common to joint tenants.
While you can arrange the switch yourself, many people prefer to use a solicitor.