Are you buying a property with someone? You’re about to enter into joint ownership, but do you know what kind? We’ll help you figure out whether a tenancy in common would suit you.
Tenants in Common Meaning
To be tenants in common you must be part of a tenancy in common agreement. A tenancy in common agreement is a situation in which 2 or more people hold interest in a property and each owner has the right to leave their share of the property to a beneficiary upon their death.
This doesn’t mean you own separate parts, but that you have separate interest in the whole property. You can even have different ownership interests - e.g. Jane may own 75% of a property and Jack may own 25%.
The fact that you own separate proportions of interest in a property makes tenancies in common suitable for people who want to purchase a property with friends and family.
Do You Need a Tenants in Common Mortgage?
You don't need a special mortgage. You simply need a normal mortgage and your solicitor will set up the ownership arrangements.
What's the Difference Between Joint Tenants and Tenants in Common?
Both tenancies in common and joint tenancies are types of joint ownership. They serve a similar purpose, which is to allow people to co-own property. However, the way they’re set up and the rules they follow are slightly different.
How do you and your co-owners decide between becoming joint tenants or tenants in common? It ultimately depends on your situation and who you want to co-own your property with. Carefully consider which option is best for you, or you risk causing problems later.
So, what are the main differences between joint tenants and tenants in common?
- In a tenancy in common, when one of the owners passes away, they can pass their ownership interest onto a beneficiary in their will. You can’t do this with joint tenancy. The title of the property is automatically given to the other, surviving owner, regardless of whether you have a will naming someone else. This is called Rights of Survivorship
- Tenants in common can have different percentages of ownership interest in a property, whereas joint tenants each own the whole value of a property, i.e. 100%. This is particularly more useful if one person is putting in significantly more deposit than the other
- Joint tenants are registered on the same deed at the same time - it’s one transaction where they act as one party, which is why the property immediately goes to the other owner if one of them dies. On the other hand, not all co-owners need to enter into a tenancy in common at the same time. You can obtain interest in a property years after the other co-owners originally set up the tenancy in common
Those in a joint tenancy or a tenancy in common agreement have to follow a couple of the same rules, including:
- All co-owners of a property must agree to sell that property
- They both need a joint mortgage to secure a jointly owned property – although tenants in common do technically qualify for separate mortgages, most lenders don’t give this option
Tenants in Common Percentage Ownership Options
Together, all co-owners within a tenancy in common agreement own 100% interest in a property. You don’t each own 100%, as in a joint tenancy, but your shares add up to 100%. The breakdown can be any variation, i.e. Dan could own 50%, Dave could own 25% and Ellie could own 25% or they could each own a third at 33.33%.
If no ownership interest breakdown is specified, it’s assumed that all owners have equal shares in the property.
How to Change to a Tenants in Common Agreement
You can change from sole owners to tenants in common via a process called transferring ownership.
You can also change from joint tenants to tenants in common.
To switch from a joint tenancy agreement to a tenancy in common, you undergo a “severance of tenancy’ and apply for a form A restriction that you send to HM Land Registry’s Citizen Centre.
You don’t need permission from the other owners to change from a joint tenancy to a tenancy in common.
If they don’t agree, you:
- Serve a notice of severance on the other owners
- Fill in form SEV to register a restriction or, if you can’t provide any evidence of the severance options listed in form SEV, fill in form RX1 to register a form A restriction
- Prepare any supporting documents you may need to include
- Send the form and supporting documents to HM Land Registry’s Citizen Centre
A solicitor, conveyancer or legal executive can handle the whole process for you. This will incur some cost, but there’s no fee regarding the actual change itself.
When Would You Need to Change?
You may need to change from joint tenants to tenants in common if you divorce or separate from your partner and want to leave your share of the property to someone else.
What Are the Disadvantages of Tenancies in Common?
The way tenancies in common work isn’t for everyone. There are some risks which you should consider before making your choice.
The risks associated with tenancies in common are:
- If a co-owner without a will dies, the property goes through probate. Probate can be time-consuming and expensive
- In the event that one tenant wants to sell the property, but the others don’t, the tenant can file a partition action. This can force the other co-tenants to sell the property
Want to Know More?
Tenancies in common allow you to be a joint owner with a little extra independence. Do you want to know more about your mortgage options? Then make an enquiry or call us on 0330 433 2927 and speak to one of our specialist mortgage advisers. We can tell you everything you need to know.