Joint Tenants vs Tenants in Common

When you purchase property with another person, your solicitor will ask you: Joint Tenants or Tenants in Common?

The purpose of this article is to explain the difference between these terms and how your decision can affect you in the future, particularly from an estate planning perspective.

Joint Tenants

Joint tenancy is a concept where each owner of a property holds the exact same (and equal) interest as all of the other owners. All joint tenants are therefore entitled to an equal share of profits if the property is rented or sold. Similarly, all joint tenants are equally responsible for the costs associated with owning and maintaining the property.

For many couples, owning property as joint tenants is preferable because of its survivorship rule. This means that when a joint tenant dies, his or her share will be equally distributed between the surviving joint owners with no stamp duty being payable on the transfer. It will not form part of the estate of the deceased owner and is generally outside the scope of a family provision application (i.e. any legal action brought by relatives challenging the will of the deceased).

Tenants in Common

Tenants in common is a concept where each owner has a separate and distinct interest in the land in specific proportions. For example, a husband and wife may own a property with equal 50/100 shares, or in 1/100 and 99/100 proportions (or any other proportion).

In some instances, the benefit of owning property as tenants in common is the ability to minimise the financial risk of one of the owners. For example, a small business owner may wish to minimise the amount of assets held in his or her name (while still remaining an owner) and therefore prefer to hold a minimal portion of the property only.

In other instances, the benefit of owning property as tenants in common is that an owner can nominate whom their share of the property will be transferred to. This decision can occur whilst the owner is alive (keeping in mind that such a transfer will attract stamp duty). Alternatively, the transfer can occur after the death of the owner by leaving a bequest in their will. Generally, people who are not in a familial relationship or who receive the property as a bequest with others choose tenants in common for this purpose.

If you own or are purchasing a property and you not sure what is the best tenancy for you, please contact our office and we will be happy to discuss your options with you.