If you’re looking to purchase a property with someone else, whether they’re your significant other or business partner, you might have heard about the different ways in which it is possible to own property in the UK. These methods vary in very important ways, but the terminology used to describe them is often complicated and difficult to understand, meaning that some may be confused about their legal position. If you want to be sure that you put yourself in the strongest possible position when you co-purchase a property, read on to learn about the differences between the two types of ownership. It’s always best to give yourself better footing, especially given the current price of property in London, New York and other major cities.
Before we start, bear in mind that the way in which we use the term ‘tenancy’ is different from its common usage. Usually, when people refer to a tenancy, they mean the contract which allows a renter to stay in their property. However, in law, a tenancy is a right to land, whether that right is given by ownership or a rental agreement. In this article we are talking about ownership of property, and we use the term ‘tenant’ in this context.
The joint tenancy is the traditional and most common way for property to be owned. Under this arrangement, each co-owner owns the property equally and in an undivided way. This mean that instead of saying that each tenant owns a particular portion of the property and its value – for example, 50% each – we simply say that both people are one entity, and that this entity owns the whole property. The benefit of this can be seen where one of the co-owners dies, in what is known as the ‘right of survivorship’. Instead of their share being subject to a will or intestate proceedings, the remaining owner simply ‘absorbs’ the deceased’s share automatically. However, trouble can arise where there is a breakdown in the relationship between the co-owners; most commonly divorce or separation. The fact that neither person has a defined share in the property makes it difficult for courts to decide who gets what.
Tenancies in common make everything much simpler. Using this device, the tenants decide in advance who should own what portion of the property. For example, a couple might decide that the party who uses their savings to pay the deposit deserves to own 60% of the home. In the event of a separation, it is then easy to decide the amount that each party receives from a sale of the property. If this never occurs, then each party can ensure that the other retains the property by mentioning this desire in their will. Tenancies in common are also far superior for commercial ventures, where an owner can sell or transfer their portion to someone else very simply. So why doesn’t everyone use this type of ownership? The answer is that it is seen as unromantic to plan for a separation, and even more so if one party seeks to ensure that they are entitled to a greater share. Regardless of this perception, it is very sensible to take this course. A tenancy in common where each party owns exactly 50% is a great, practical compromise which values each party equally and avoids the pitfalls of a joint tenancy.
Author Bio: Fyodor is a legal consultant working for a firm of estate agents in London. In his spare time, he enjoys reading, blogging and cooking.