Jointly owned property – joint tenants or tenants in common

There are two ways in which you can hold the “beneficial interest” in jointly owned property.

• Jointly owned property is land or buildings owned by more than one person.
• The beneficial interest in land and buildings is the right to occupy, the right to receive the proceeds of sale and the right to receive the rents and income.
• The beneficial interest in property can be held either as “joint tenants” or “tenants in common”.

Joint Tenancy 

If it is held as joint tenants, the owners jointly own the whole of the beneficial interest. This means that if either of them dies, the rule of “survivorship” applies and the beneficial interest automatically passes to the remaining owners until only one owner remains and that person becomes entitled to the whole.

Typically, this is used when a joint owner wishes to leave their beneficial interest in the property to the other co-owner(s) – an example of this might be spouses or civil partners who want to pass the property to the other on their death. A joint tenancy means that this happens automatically on death without their Will needing to operate to do this.

Tenancy in Common 

If it is held as tenants in common, the owners each have their own proportionate share. This is usually split equally between the joint owners, but it can be split in different proportions. The individual owners can then transfer or pass on their own share as they desire. This means that if either of them dies, their proportionate share is passed to the beneficiaries in their Will or in accordance with the “intestacy” rules that apply if a person has not made a Will.

Typically, this is used when a joint owner wishes to leave their beneficial interest in the property to someone other than the other co-owner(s) – an example of this might be siblings that own investment property where they want their share in the property to pass to their children or next of kin.

“Severing” a joint tenancy 

It is possible for any co-owner of jointly held property to “sever” a joint tenancy by giving notice to the other co-owners and this has the effect of converting the property from being held as joint tenants to being held as tenants in common in equal shares.

An example of a situation where one of the parties may want to sever a joint tenancy is on the breakdown of a relationship between co-owners or on the divorce of spouses or civil partners holding property as joint tenants. Separation or divorce does not of itself sever a joint tenancy.

Converting a tenancy in common to a joint tenancy would involve all parties entering into a declaration of trust.

More complex situations 

Some people (including spouses and civil partners owning property together) might use a tenancy in common with unequal shares to shift income to the co-owner with unutilised tax allowances or a lower marginal tax rate for tax planning purposes. Others may use a tenancy in common to put their beneficial share in trust for various tax, family and estate planning purposes.

Another common situation where a tenancy in common might be used is if two or more people buy a house together and make unequal contributions to either the initial capital or the ongoing running or mortgage costs.

We cannot advise on the suitability of these more complex arrangements from a tax perspective and we would advise that you take advice from an accountant or independent financial adviser in relation to this.

These types of more complex arrangements would usually be implemented by entering into a declaration of trust – this is something that we can assist with when the decision has been made on a proposed structure, based on accounting or independent financial advice.