A guide to joint ownership

In a joint ownership, there are two or more owners of a property known as co-owners. The co-owners will hold the legal title as joint tenants.

However, co-owners can hold a beneficial interest in the property in one of two ways: as beneficial joint tenants or as tenants-in-common.

Beneficial joint tenants

Where co-owners hold the property as beneficial joint tenants, they each own the whole of the property. They do not hold a separate share of the property and they are not able to give their share away during their lifetime or upon their own death.

If the property is sold, then it is presumed that the co-owners own the property equally, regardless of any differing contributions to the purchase price.

On the death of one joint tenant, the property will automatically pass by survivorship to the remaining joint tenant(s), regardless of any intention in their will. When there is only one surviving joint tenant, they will become the sole owner of the property and the property will form part of their estate when they die.

It is common for married couples and civil partners to hold a property as beneficial joint tenants so that the property automatically passes to the survivor when one of them dies, without the necessity for any legal formalities.

However, if one co-owner has made a larger contribution to the purchase price or if a co-owner wishes to protect their share for someone other than the other co-owner, then it may not be suitable for the property to be held as beneficial joint tenants.

Tenants-in-common

Where co-owners hold the property as tenants-in-common, they each own a defined share in the property. The shares can be fixed from the purchase date or the shares can vary according to the financial contributions made by each co-owner over the years.

When the property is sold, the net sale proceeds will be divided between the tenants-in-common as per their shares. In the absence of any evidence of formal agreement, the shares will be presumed to be equal.

On the death of one tenant-in-common, their share in the property will pass under the terms of their will or the Laws of Intestacy if they did not leave a will. The property does not automatically pass by survivorship to the surviving tenants-in-common.

Furthermore, a tenant-in-common can give their share in the property away at any point during their lifetime.

It is common for spouses/civil partners of second and subsequent marriages/civil partnerships to hold the property as tenants-in-common, particularly where there are children from the previous relationship, so that they can protect their shares in the property for beneficiaries of their choice.

It is also common for friends and young couples who buy a property together to hold the property as tenants-in-common so that they can protect their shares in the property for their own families should they die.

Declaration of trust

A declaration of trust is a legal document that is used to set out the shares held by each co-owner where the beneficial interest in the property is held as tenants-in-common. The declaration of trust is generally conclusive evidence of each co-owner’s share and the courts will give it effect unless there has been fraud or a mistake.

Problems may arise in the absence of a declaration of trust, as the Land Registry only records the owners of the legal title and not the beneficial interests and so it may be difficult to determine each co-owner’s share in the property. This could lead to a dispute, legal costs and the possibility of the court dividing a property in a way that was not agreed by the coowners at the outset.

It is, therefore, extremely important that a declaration of trust is prepared at the same time that the property is purchased.

Property trust wills

Property trust wills are commonly made by spouses/partners who own their property as tenants-incommon (or as joint tenants who agree to sever the beneficial joint ownership) and who wish to protect their shares in the property for beneficiaries of their choice. This may be because they have children from a previous relationship that they wish to protect or because they wish to protect their share in the property from the effects of long-term care fees or re-marriage.

The wills work by creating a trust when one spouse/partner dies. Their share in the property is held in trust for the beneficiaries of their choice, but the survivor can remain in the property for the remainder of their lifetime. It is usual for the wills to include additional provisions, which can be as flexible or inflexible as the spouse’s/partner’s wish and it is important for the wills to be correctly prepared.