Tenants in common vs joint tenants

What is joint tenancy?

Buying a property as joint tenants means that you both have an equal share and equal rights to the whole property. You effectively own 100% of the property together, and neither tenant has a specific share that is theirs.

It doesn’t matter how much either tenant contributed to the deposit or pays towards the monthly repayments; the property is still owned equally. Each tenant is entitled to 50% of the sale proceeds when the property is sold.

Entering into a joint tenancy also means the property will automatically go to the other tenant if one of you dies. It’s not possible to leave your share of the property to someone else in your will.

Pros and cons of joint tenancy

Pros of joint tenancy

• The most straightforward type of property ownership

• All owners have equal rights to the property

• It may mean you don’t need to draft a will

• Suited to couples who want their partner to inherit their share of the property

• Lower legal fees and documentation required

Cons of joint tenancy

• Proceeds of any sale are split 50/50, even if one tenant has contributed more towards the property

• All parties need to agree to sell the property

• You can’t pass your share of the property to someone else in your will

• You cannot use a deed of trust to separate a share of the property

What is tenancy in common?

If you buy a property as tenants in common, you can have different shares. For example, if one of you provided 75% of the deposit and will be contributing 75% of the repayments, you could divide the property on a 75/25 basis.

This is a popular option if buying with friends or for parents who want to help their child get onto the property ladder. It means your share of the property won’t automatically go to the other owners after you die, and you can choose who it goes to in your will.

Tenancy in common can be more flexible because the share can be updated over time. For example, if one owner contributes more towards the repayments or pays off a lump sum of the mortgage, their overall share can be increased.

Pros and cons of tenancy in common

Pros of tenancy in common

• Each tenant owns their share of the property

• You can leave your share to whoever you choose in your will

• All owners have equal rights, no matter their share size

• You can use a deed of trust to agree on what will happen if one owner wants to sell the property

• Owning an unequal share can be more tax-efficient

Cons of tenancy in common

• Getting a deed of trust can be expensive

• You will need to have a will to confirm who you want your share to pass to

• The other owner could sell their share to anyone without needing approval from you

• You may need a Form 17 if you receive rental income from the property

Differences between joint tenancy and tenancy in common

Here’s a breakdown of the key differences between joint tenants and tenants in common.

Property ownership

• Joint tenancy: Each tenant has an equal share in the property, and any proceeds from a sale must be split evenly.

• Tenancy in common: You can split the ownership however you like between the owners, for example, 60/40. 

Inheritance after death

• Joint tenancy: The property will automatically pass on to the surviving owners, and there is no option to leave your share to someone else in your will.

• Tenancy in common: Your share will become part of your estate when you die and can be passed on to the beneficiaries of your will.

Mortgage

• Joint tenancy: To own a property on a joint tenancy basis, you must have a joint mortgage. Joint mortgages are usually taken out between two people, but most lenders allow up to four borrowers.

• Tenancy in common: It is possible to take out your mortgage that just covers your share of the property; however, in reality, very few lenders allow this, so you’ll need a joint mortgage.

Inheritance tax

• Joint tenancy: You will not be charged inheritance tax when you die because your share automatically passes to the other owner.

• Tenancy in common: Your share of the property will be added to your estate when you die, which will be liable for inheritance tax.

Can I switch joint ownership type?

It is possible to change from a joint tenancy to a tenancy in common or vice versa at any time. You can also change from being a sole proprietor to joint tenants or tenants in common if you want to add someone as a joint owner of your property.

Changing a joint tenancy to a tenancy in common

Changing a joint tenancy to a tenancy in common is known as ‘severance of joint tenancy’. 

To do this, you need to apply for a Form A restriction. A solicitor can make the application for you, and you can make this change without the other owners' agreement.

However, if the other owners haven’t agreed to the change, you must give them a written notice. You’ll need to supply a copy of the notice of severance signed by the other owners.

You should send the form and any supporting documents to HM Land Registry. There is no fee for making this change.

Changing a tenancy in common to a joint tenancy

All joint owners must agree to change from being tenants in common to joint tenants. 

You will need to fill in a new or updated trust deed, which you’ll need to get a conveyancer to help with. You’ll also need to complete a form to cancel a restriction if one has been registered.

You should then send the form, trust deed (or a certified copy), and other support documents to the HM Land Registry. 

Which option is right for you?

It is ultimately up to you and the person with whom you buy a property to decide which ownership type is best for you.

Typically, a joint tenancy might be the right option if you:

• Are in a long-term relationship or a married couple

• Want the property to go to the other owner when you die

• Want to share equal ownership of the property and proceeds

A tenancy in common may work best if you:

• Are buying with friends

• Have made unequal contributions to the purchasing the property and want that to be reflected in the ownership of the property

• Want to leave your share of the property to someone other than the other owner(s)

If unsure, speak to the solicitor or conveyancer dealing with your purchase. They can help outline the legal implications of each option and help you make a decision that works for you.