Joint Tenants vs Tenants In Common

Did you know that if you buy a property with someone else, you can choose what type of ownership you both have? The two main kinds of ownership or joint tenancy and tenants in common. Both of these options have their pros and cons, so it’s up to you to decide which type of ownership works best for you. We will take a look at both joint tenancies and tenancies in common, the benefits and drawbacks of each, how to change from one type of ownership to another, and other important things that you should know about joint property ownership.

Table of Contents

What are Joint Tenants?
What are Tenants in Common?
Pros and Cons of Joint Tenants vs Tenants in Common
How to Change Your Type of Ownership

What are Joint Tenants?

In a joint tenancy, all parties have equal rights and shares in a property. The ownership of the property is not divided up into shares; rather, each party owns 100% of the property. If one owner dies, then their share of the property automatically goes to the surviving owners. It does not become part of the deceased person’s estate. Up to 4 people can own a property together through a joint tenancy. Joint tenancies are usually used when the parties have a close relationship, e.g. when a married couple buys a property together, this is a joint tenancy. If you have a joint tenancy and a mortgage, you are considered “jointly and severally liable”, and the mortgage lender will hold both parties responsible for the mortgage repayments. Each party is equally responsible for paying the mortgage, regardless of who is actually making the mortgage payments. If someone stops making the repayment, the mortgage lender can pursue the other joint tenants for the payments.

What are Tenants in Common?

Another kind of property co-ownership is tenancy in common. This kind of ownership gives each tenant specific shares in the property as defined by a legal agreement. If the property is sold, the proceeds will be split according to the proportion of shares each person holds in the property. If a co-owner of the property dies, then, unlike a joint tenancy, they can bequeath their shares in the property to beneficiaries as part of a legacy or estate. The split between co-owners is usually decided by how much money each party can provide as a deposit or how they share the mortgage repayments. If one party provided 70% of the deposit and mortgage payment, they usually have a 70% share in the property, and so forth. All this will be pre-agreed in a legal document before the purchase of the property. This type of property ownership is more common when the co-owners are business partners.

FAQ: What if more than 4 people want to own a property?

According to the Law of Property Act 1925, no more than 4 people can be co-owners in a joint tenancy or tenancy in common. If you want to buy a property with more than 4 people in total, they can all share the beneficial interest, but only up to four can be legal owners. A trust must therefore be created to reflect the interests of those not on the legal title. The most common type of trust is an Express Trust Deed, or Declaration of Trust. This is a document drafted and signed by all co-owners that states how the beneficial interest is held, for example, that the four legal owners hold the property on trust for all individuals as joint tenants. It should be legally executed and ideally referenced in the property purchase documents.

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Pros and Cons of Joint Tenants vs Tenants in Common

Co-ownership enables people to share the costs of buying a property, whether it’s a home to live in together or a property investment. Often, a joint tenancy is more suitable for couples, families or close friends who want to share a property that they all live in together. A tenancy in common is more suited to business partners who want to invest in a property together. Here are some pros and cons of each kind of shared ownership:

Pros of Joint Tenancies

Right of Survivorship – upon the death of one owner, their share automatically passes to the surviving co-owner(s), bypassing the probate process.

Equal Ownership – each joint tenant has an equal stake in the property, regardless of individual financial contributions.

Simplified Legal Process – the transfer of ownership upon death is straightforward, as it doesn’t require probate.

Cons of Joint Tenancies

Lack of Individual Control – you cannot leave your share to someone else in your will; it automatically goes to the surviving co-owner(s).

Equal Financial Responsibility – all owners are equally liable for mortgage payments and other property-related expenses, which might not reflect individual contributions.

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Inflexibility – changing ownership shares requires converting to a tenancy in common, which involves legal procedures

Pros of Tenancies in Common

Flexible Ownership Shares – owners can hold different percentages of the property, reflecting their individual contributions.

Estate Planning – each owner can bequeath their share to beneficiaries of their choice through a will.

Adaptability – ownership shares can be adjusted over time to reflect changes in contributions or circumstances.

Cons of Tenancies in Common

No Right of Survivorship – upon death, an owner’s share doesn’t automatically pass to the other co-owners; it goes to their heirs, potentially leading to complications.

Potential for Disputes – differing ownership percentages and the involvement of heirs can lead to disagreements over property decisions.

Complexity in Transactions – selling or transferring shares may require more legal work, especially if co-owners disagree.

How to Change Your Type of Ownership

You can change your property ownership type from joint tenancy to tenancy in common, or vice versa, depending on your personal circumstances or future plans. If you own a property with a joint tenancy, e.g. as a married couple, you can change this to a tenancy in common if the marriage ends. Each owner should apply for a Form A restriction by completing an SEV form from the Land Registry. Also, you can transfer from a tenancy in common to a joint tenancy if all owners agree to do so. The Deed of Trust or agreement between towners should be amended to reflect this change.

There are several benefits and drawbacks to each kind of co-ownership, and the right choice for you depends on your personal situation and investment goals. It’s always recommended to consult with a legal professional who specialises in property law to determine the best arrangement for your situation.

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