In the UK, there are 250,000 shared ownership households, a figure which has risen 20% since 2021, meaning that only 29.6% of UK houses are occupied by one person living alone.
However, when you buy a home with a second person, you need to let the Land Registry know how you would like to own it. It can either be as a joint tenant or a tenant in common.
This blog explains the difference between a joint tenant and a tenant in common and will help you figure out which one is right for you.
What is a joint tenancy?
A joint tenancy is a legal arrangement where two or more people own a single property together and have equal obligations and rights.
With a joint tenancy, both parties own the property in 50/50 shares. This means that if one of you dies, the other tenant will automatically inherit their share of the property. This is the case even if the deceased’s Will states otherwise.
If the property is sold, both parties need to agree to the sale, and all proceeds are split 50/50 between the two joint tenants.
This also means that if you are a joint tenant with a partner and one of you dies, the property will automatically pass to the surviving partner, even if you have children and a Will.
Pros and cons of joint tenancy
Pros:
- Security for a surviving partner after death, through the right of survivorship
- A straightforward, easy process
- Helps you avoid probate
- Equal liability for all shares in the property
Cons:
- Because of the right of survivorship, your property could still pass to a partner even after you have divorced
- While the property is shared equally, you might end up paying more than your partner towards the mortgage
What are tenants in common?
If you choose to own the property as tenants in common, you each have a 50/50 share of the house. However, if one of you dies, your Will is used to determine who inherits your share of the property. If there is no Will, it will pass to the nearest living relative under the rules of intestacy.
Tenants in common can leave their share to anyone they choose in their Will, and can also sell or give away their share if they want to.
It’s also possible to have unequal shares between tenants in common, for example if one tenant has paid more towards the deposit or the mortgage.
Finally, if you need to move into a care home later in life, you will only be means-tested on your own share of the property.
Pros and cons of tenants in common
Pros:
- Your share passes to the beneficiaries named in your Will when you die
- You can share rental income between owners
- You can reduce your inheritance tax liability
Cons:
- Without a deed, it can be difficult to prove how much of the property you own
- If you die, the surviving owner may need to sell the property in order to distribute your share
Which is right for you?
Which option is right for you depends on the relationship between the joint owners.
Married couples
Married couples are generally advised to be joint tenants. Thanks to the right of survivorship, this simplifies inheriting the property automatically without having to go through probate. That said, because this carries a risk should you later divorce, it’s still advisable for the surviving partner to have a valid Will in place.
Unmarried couples
Unmarried couples are generally advised to be tenants in common, to protect individual assets and ensure they can be passed on to chosen heirs rather than automatically to a partner. The same applies to friends or family buying together, to make sure their finances are protected if the relationship changes.
Buy-to-let investors
Buy-to-let investors are also recommended to be tenants in common, as it allows for an unequal split of rental income, which can be used for tax efficiency.
How Davisons Law can help
If you’re thinking of buying with your partner and need help deciding which option is best for you, get in touch with Davisons Law today. Our family law solicitors will be able to advise you accordingly.
