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Tenants in common, more common?

When purchasing a property as a concurrent estate, it is important to consider the different forms of legal ownership.

It is no longer just married couples that choose to co-own properties. We are seeing more and more couples cohabiting, and first time buyers purchasing properties in unequal shares.

There are two types of legal ownership for co-owners, Joint Tenancy and Tenancy in Common, with important distinctions between them both.

A joint tenancy is where the parties hold an equal undivided interest in the property. It is common with married couples, and the most important feature of this type of co-ownership is the right to survivorship. If a party passes away, ownership of the property passes to the surviving tenant(s) forming part of their estate.

For instance if you were to enter into a joint tenancy with your spouse, you’d both own an equal undivided share despite your contributions to the purchase price, and if one of you were to pass away, the rights of the property would be transferred into the surviving spouses’ estate. In order to create a joint tenancy the property must be acquired at the same time, there must be a unity of title; the co-owners must have an equal interest in the property and an equal right to possession, all signed in deed. Without these the co-ownership would be a tenancy in common.

A tenancy in common refers to a simultaneous ownership, in which each party holds an individual interest in the property. It is common with un-married couples or parties who have contributed different amounts to the purchase price. The parties have an equal right to the use of the property, and retain the right to sell or transfer their interest to another party.

Unlike a joint tenancy the parties don’t have the right to survivorship, and if a party was to pass away, the tenants interest in the property will remain part of their estate, and can be distributed in their Will. Although tenants in common have more freedom if they choose to sell or transfer their share, restrictions can be agreed when signing the tenancy in common agreement.

With divorce rates on the rise, and more financially independent couples, tenancy in common is the most advisable option for co-ownership. Many people are purchasing properties in un-equal shares, and tenancy in common allows you to retain that interest without merging it into an undivided share with other joint tenants, meaning if you do choose to sell your share, you will not feel short changed if you contributed more. It also means that you’re share in the property is guaranteed to be part of your estate when you are deceased, allowing your share to be inherited by who you wish.

By Eileen Wood, Wills & Probate team