When buying a property with someone else, one of the key decisions you need to make is how to own the property together. The two main ways to do this in the UK are as Joint Beneficiaries (Joint Tenants) or Tenants in Common. Each option has its own benefits and drawbacks, so it’s important to understand them before making your decision.
Here, we break it down into plain terms to help you make the right choice for your situation.
Joint Beneficiary (Joint Tenants)
This is the most common option for couples or close family members purchasing a property together. When you own the property as Joint Tenants:
- Equal Ownership: Both parties own the property equally, regardless of how much money each has contributed.
- Right of Survivorship: If one owner passes away, their share automatically passes to the other owner without the need for probate.
- Simple Division: No separate shares are defined; it’s all shared equally.
Pros:
- Simpler legal process if one owner dies (no need for a will or probate to transfer ownership).
- Clear and equal ownership, which can make things easier for couples who share finances.
Cons:
- Lack of flexibility if contributions to the purchase were unequal.
- Your share cannot be left to someone else in your will – it automatically goes to the other owner.
- Can complicate matters in the case of separation or disagreement.
Tenants in Common
With this option, each owner owns a specific share of the property. This is often chosen when people contribute unequally or have different financial goals. Here’s how it works:
- Defined Shares: You can own unequal shares, such as 70/30 or 60/40, based on your contributions.
- Will Required: Your share does not automatically go to the other owner if you pass away. Instead, it can be passed on to someone else via your will.
- Flexibility: This setup allows for more tailored arrangements.
Pros:
- Protects unequal contributions, which can be helpful for friends, family members, or unmarried partners.
- Allows you to leave your share to someone other than the co-owner.
- Suitable for investment purposes or partnerships.
Cons:
- Requires clear agreements upfront (preferably in writing) to avoid disputes.
- More complex if one party wants to sell their share.
- Probate may be needed if one owner passes away.
Key Considerations
When deciding between Joint Tenants and Tenants in Common, think about:
- Your Relationship:
- Are you a couple planning to share everything equally? Joint Tenants might make sense.
- Are you friends or relatives with unequal contributions? Tenants in Common might be better.
- Future Plans:
- Do you want your share of the property to go to your co-owner or to someone else (e.g., children)?
- Are you investing together as a business decision?
- Financial Contributions:
- Did one party contribute significantly more to the deposit or purchase price?
- Do you plan to share future costs (e.g., mortgage payments) equally or unequally?
- Legal Protections:
- Do you have a will in place? This is essential for Tenants in Common arrangements.
- Have you drafted a Declaration of Trust to outline shares and responsibilities? This is highly recommended for Tenants in Common.
Making the Right Decision
Deciding how to own property is a big decision and can have long-term implications. It’s always a good idea to:
- Seek Legal Advice: A solicitor can explain the legal implications and help you formalise agreements.
- Discuss Openly: Have honest conversations with your co-owner(s) about your intentions and expectations.
- Plan for the Future: Consider how changes in your circumstances (e.g., marriage, separation, children, or death) could affect your ownership.
Need Help?
At Clever Mortgages, we’re here to guide you through every step of the property-buying process, including understanding ownership options. If you’re unsure about the best option for your situation, our team can connect you with trusted legal professionals and help you make an informed decision.
Contact us today to learn more about how we can help you achieve your property goals!
