Tenancy In Common vs Joint Tenancy| Which Is My Best Option?

It's important to understand what you're signing up for when it comes to owning property as a joint tenant or a tenant in common. There are pros and cons to both. 

This article will help you distinguish between joint tenancy and a tenancy in common, so that an informed decision can be made on which one is right for you.

Difference between tenancy in common and joint tenants

When it comes to tenancy in common vs. joint tenancy, there are a few key differences to keep in mind. For starters, with tenancy in common, each tenant owns a specific percentage of the property .  The percentages can be determined when the property is purchased or inherited. On the other hand, each joint tenant owns an equal share of the property.

Another key difference is that tenants in common can pass on their ownership stake to anyone they choose, whereas joint tenants must pass on their stake to the other joint tenant(s). This can be important to consider if you want your ownership stake to go to a specific person (or persons) after your death.

Finally, it’s worth noting that tenancy in common does not come with the right of survivorship – meaning that if one tenant in common dies, their ownership stake does not automatically go to the other tenant (or tenants). Joint tenancy, on the other hand, does come with this right of survivorship.

Joint Tenancy

What does a Joint Tenant mean?

Joint tenancy is when two or more people own a property together and share equal rights and responsibilities. This means that if one of the owners dies, their share of the property will automatically pass to the other owner(s). This can be a good option for couples who want to ensure that their home is passed on to each other in the event of one person’s death.

How Does A Joint Tenancy Work?

A joint tenancy is a type of co-ownership where each tenant owns an undivided interest in the property. This means that each tenant has an equal right to use the property. Joint tenants have the same rights of survivorship, which means that if one tenant dies, their interest in the property passes to the surviving tenant(s).

There are several things to consider before choosing a joint tenancy, such as whether you want your interest in the property to pass to your heirs upon your death and whether you want to be able to sell your interest in the property without the consent of the other tenants.

Example of Joint Tenancy

One example of joint tenancy is when two people own a piece of property together. In this case, each person owns an undivided interest in the property and has an equal right to use the property. If one of the owners dies, the other owner automatically becomes the sole owner of the property.

Joint Tenancy benefits

There are several advantages to joint tenancy, including the following:

Simplicity: joint tenancy is a relatively simple way to hold title to a property;

Flexibility: joint tenancy can be created for any type of property, including property investments, vehicles, and bank accounts;

Automatic survivorship: upon the death of one joint tenant, the surviving tenant(s) will automatically inherit the deceased tenant's interest in the property; and

Control: all joint tenants have an equal say in how the property is used and managed. 

What Are The Risks Of A Joint Tenancy?

There are a few risks associated with joint tenancy that property investors should be aware of.

One risk is that if one tenant in a joint tenancy dies, the entire property passes to the surviving tenant or tenants. This could be an issue if the surviving tenant can't afford to maintain the property on their own or if there are disagreements about what to do with the property.

Another risk is that all tenants in a joint tenancy are equally responsible for any debts or liabilities incurred on the property. So, if one tenant damages the property, the other tenants are liable for repairing the damage.

Finally, it can be difficult to end a joint tenancy agreement if all tenants don't agree to terminate it.

Given these risks, property investors should weigh them against the benefits of joint tenancy before deciding whether it's the right choice for them.

Tenants in Common

What is Tenancy In Common?

In tenancy in common, each tenant owns a separate and distinct interest in the property. This means that each tenant can use and enjoy the property as they see fit, without having to obtain the consent of the other tenants. 

How Does Tenants in Common work?

Tenancy in common is a type of property ownership where two or more people hold an undivided interest in the property. This means that each tenant owns a specific portion of the property and is free to sell or transfer their interest at any time.

There is no right of survivorship with tenancy in common, so if one tenant dies, their interest in the property does not pass on to the other tenants.

Example of Tenancy In Common

One example of Tenancy In Common is when three people own a property together. In this case, Peter owns 43% of the property, Mary owns 37% and Jane owns 20%. Each of them are free to sell or transfer their ownership interest whenever they wish.

Benefits of Tenants In Common

There are a few key advantages to tenancy in common that make it a popular choice for co-ownership.

First, each owner has their own interest in the property, which means they can sell or transfer their interest without the consent of the other owners. This can be a big advantage if one of the owners wants or needs to sell their interest for any reason.

Another advantage of tenancy in common is that each owner can leave their interest to whomever they choose in their will or estate plan. This can be a big benefit if you want to leave your share of the property to someone other than your co-owners, such as a child from a previous relationship.

Finally, tenancy in common can provide more flexibility when it comes to financing the property. Each owner can apply for their own mortgage on their interest in the property, which can be helpful if one of the owners needs to refinance for any reason.

What are the risks of a Tenancy In Common?

There are a few key disadvantages of tenancy in common that should be considered before choosing this type of ownership.

First, it can be difficult to transfer ownership of a property held in tenancy in common. This is because each owner must agree to sell or transfer their interest in the property. This can be especially tricky if there are multiple owners involved.

Secondly, tenancy in common does not offer the same protections as joint tenancy. If one tenant in common dies, their interest in the property does not pass automatically to the other tenant(s). This can lead to complications and disputes among the owners.

Finally, tenancy in common can be more expensive to set up than joint tenancy, as it typically requires the help of a lawyer or other professional to draft the necessary paperwork.

Frequently Asked Questions

Rights of survivorship

The right of survivorship is a key feature of joint tenancy. It means that if one owner dies, their interest in the property passes to the surviving owner(s). This can be an important consideration for people who want to ensure that their property goes to a specific person or group of people upon their death.

In the United Kingdom, it is not possible to stipulate in a will who inherits property that is jointly owned. That’s because property under a joint tenancy automatically passes to the surviving joint tenant(s) on the death of the other joint tenant.

Joint Mortgages

There are many benefits to taking out a joint mortgage, especially if you are buying a property with someone else. Not only will you be able to pool your resources and potentially get a better mortgage rate, but you will also be able to share the burden of the repayments.

However, there are also some risks associated with taking out a joint mortgage. For instance, if one person fails to make their repayments then the other person is liable for the full amount. This can put a strain on personal relationships, as well as having financial implications.

Before taking out a joint mortgage, it is important that you discuss the pros and cons with your partner and make sure that you are both comfortable with the arrangement.

Concluding Thoughts

Tenancy in common and joint tenancy are two different ways to own property with another person. Both have their own advantages and disadvantages, so it's important to understand the difference before deciding which one is right for you.

So which type of tenancy should you consider? It really depends on your specific situation and what’s most important to you. If you want more control over who inherits your ownership stake, then tenancy in common may be the better option.

Overall, tenancy in common can provide more flexibility and freedom for co-owners than joint tenancy. If you're considering co-ownership with someone, tenancy in common may be the best option for you. Specifically, Tenancy in common gives each owner the right to sell or transfer their interest in the property, while joint tenancy requires all owners to agree to any changes. Joint tenancy also has the advantage of allowing owners to pass on their interest in the property to their heirs, while tenancy in common does not.

Ultimately, it's up to you to decide which ownership option is best for your situation.

Peter D Doherty

Peter D Doherty is the founder of the Property Investor Academy.

A Masters graduate in accounting and finance from Dublin City University, Pete worked in the City of London for 14 years. He held senior finance roles (Financial Controller) in several substantial UK commercial banks. He is a graduate of Macquarie University.

With over 10 years property investing experience, he is the owner of a London based lettings agency as well as proptech consultancy. He regularly contributes to online landlord forums such as Propertytribes and Reddit.  Peter is a member of National Residential Landlords Association (“NRLA”).

https://uk.linkedin.com/in/peter-doherty-tal
Next
Next

Buy To Let Mortgage Deposits: The Ultimate Guide