Property Ownership – Joint Tenancy or Tenancy in Common?
When a property is purchased jointly by more than one person, it can either be held as Joint Tenants or as Tenants in Common. As Joint Tenants, this means there is a strong presumption that all the owners own this property in equal shares, regardless of the financial contributions which each party may have made towards the purchase.
A Right of Survivorship also applies in respect of Joint Tenancies, whereby in the event of one of the parties dying, that person’s interest in the property will pass automatically to the other owner or owners, regardless of whether the deceased owner has made a Will or not.
Alternatively the property can be purchased as Tenants in Common. If so, then this means the parties could either own the property in shares agreed by them. For example, they could own the property in equal shares or in different shares to each other. Therefore when the property is purchased, if one of the parties pays more towards the purchase of the house, it can be agreed that they should own a larger share of the property than their co-purchasers. This type of ownership is useful for inheritance and capital gains tax purposes.
There is no Right of Survivorship with a tenancy in common, which means in the event of one of the parties dying, their share in the property will pass according with their Will or, if they have no Will, under the Intestacy Rules.
This technical difference is of particular relevance when a couple are separating (whether they are married or not) as ordinarily, they will own the property as joint tenants but perhaps won’t want their ex to automatically inherit the property should they die before they resolve any financial issues between them.
Either party may therefore sever the joint tenancy if they wish. That is done by one of them serving a notice on the other that is then registered with the Land Registry. From that point on, they will continue together to own the property jointly, but as “tenants in common”.
It should be noted that severance does not then influence any final decision as to how the property is dealt with by the court. It is simply a protection mechanism and does not necessarily mean that the equity in the property should be divided 50/50.
In addition to the service of a notice under Section 36 (2) of the Land Property Act 1925, severance of a joint tenancy can also be effected in the following ways:
1. A certain type of act by either party;
2. By mutual agreement;
3. A course of dealing.
What Advice Should Be Given By My Conveyancing Lawyer?
Your conveyancing solicitor should raise this with you during the transaction. If the parties are agreeable to owning the property in equal shares, with the property to pass entirely to the surviving partner in the event of the other’s death, then it will be suitable for them to own the property as joint tenants.
However, if the parties wish to own the property in different shares, then they will be advised to buy it as tenants in common. It will then be advisable for a Declaration of Trust to be prepared by way of confirmation of each parties’ share in the property. If the purchasers should wish to own the property in equal shares but would not wish the other to retain the property automatically in the event of their death, then once again they will need to be advised to own the property as tenants in common. If the purchasers wish to buy as tenants in common, it is also advisable to have a Will, or update your Will specifically addressing your share in the property and who you would wish to inherit.
What is Severance of the Joint Tenancy?
If a property is purchased jointly as Joint Tenants, it may that one of the purchasers subsequently decides that they no longer would wish their co-owner to be entitled to retain the entire property in the event of their death. If this is the case, then steps will need to be taken in order to sever the joint tenancy.
The effect of severing the joint tenancy is that the property will continue to be held by the parties in their joint names, but instead of the parties owning the property as joint tenants in equal shares, they will own the property as Tenants in Common in equal shares.
In the event of one of the owners dying, the deceased person’s half share of the property would no longer pass automatically to the other owner, but instead would pass in accordance with the deceased person’s Will or, if they do not have a Will, the Intestacy Rules. Likewise though, if the other party dies, their share will no longer pass to the surviving owner by way of survivorship.
How do I Sever the Joint Tenancy?
Severing the Joint Tenancy is a relatively straight forward task. A Notice of Severance, signed and dated by the party who wishes to sever, will need to be served upon the co-owner. This could be done by simply sending the Notice of Severance to the other party in the post and asking that they sign and date the notice themselves and return it.
Upon return of the Notice of Severance, duly signed and dated by the other party, this will then need to be sent to the Land Registry in order that a Restriction may be entered against the title to the property.
What Happens If The Other Party Does Not Return The Signed Notice of Severance?
Your Notice is still effective but the Land Registry will only agree to make an entry in the property register if they are satisfied that the Notice of Severance has been served on the other party. The best way to prove this is by providing a Notice of Severance which has been signed and dated by the other party.
However, provided the Land Registry are satisfied that the Notice of Severance has been served on the other party, they will then agree to register the required Restriction, even if the Notice of Severance has not been signed and dated by the other party.
How Do I Make The Decision As To Whether To Sever The Joint Tenancy
Whilst your lawyer can advise as to the pros and cons, ultimately this is your decision. There is no right answer, so you would have to decide what you feel would be best in the circumstances.
Severing the joint tenancy can be a double edged sword. By severing the joint tenancy, this will prevent one party’s half share interest in the property going automatically to the other. However likewise, severing the joint tenancy means that if the other party should die, then likewise their share will not pass automatically to the other co-owner.
When Should I Give Consideration To Severing The Joint Tenancy?
If you would not wish your co-owner to receive your half share of the property automatically in the event of your death. This is often a matter which is considered when a relationship comes to an end, whether or not the parties are married.
For example, if a marriage were to come to an end, one of the spouses may decide that they would no longer wish the other spouse to receive their half share interest in the matrimonial home automatically on death. Instead they may wish for their share in the matrimonial home to pass to someone else, such as their children. If so, they will need to sever the joint tenancy and would also need to make a Will, in which they can specify, amongst other things, to whom their interest in the matrimonial home will pass to in the event of their death.
What Is The Cost ?
Severing a joint tenancy is not expensive. Provided the other party co-operates and signs and dates the Notice of Severance, there is no reason why the costs should be any more than £175.00 plus vat at most.
Advice on Severing a Joint Tenancy
Amanda Lipman is a specialist property solicitor at Geoffrey Lurie Solicitors. If you need advice on ownership of your property or a disputed property matter, please contact Amanda 0n 0191 466 1444 and she will be happy to discuss your circumstances in more detail and give you information about the services that Geoffrey Lurie solicitors can provide. Alternatively email firstname.lastname@example.org or contact us here.