Quite often this will be the largest asset you and your partner own and it is important that you understand how you own that property. If you chose to buy your home together then you will each be a co-owner.
As co-owners, you can hold the property in one of two ways, namely:
- Joint Tenants; or
- Tenants in Common.
If you do not know how you own your property, then it is relatively easy (for a small fee) to obtain office copy entries from the Land Registry which will confirm which way you own your property and this will enable us to be able to advise you properly.
If you hold the property as joint tenants, both of you will own the whole of the property. You will not each have a specified share in the property and will not be able to leave a share of the property in your will.
On the death of one co-owner, their interest in the property would automatically pass to the remaining co-owner without any further action. The surviving co-owner would then own all of the property and on their death it would form part of their estate. This is known as the "rule of survivorship". The rule of survivorship applies immediately on the death of the first of you and the whole of the property immediately then belongs to the survivor. This happens even if the first person to die has a Will which attempts to leave their share of the property to someone else.
This method of co-ownership is commonly used by married or cohabiting couples or those in a civil partnership because the right of survivorship makes it straightforward for the co-owners to inherit each other's shares in the property.
However, there may be extremely good reasons for co-owners not to become joint tenants. For example, if they have made unequal contributions to the purchase price of the property or have a family from an earlier marriage and wish to leave their interest in the property to them, instead of passing it to the other co-owner. If this is applicable we always advise that, at the same time as purchasing the property, Succession Planning is considered with our Tax and Estate team.
It is often the case that people only think about this properly when they decide to separate but it is far better to consider this when purchasing the property at the outset and the relationship remains good.
Tenants in common
If you hold the property as tenants in common, each of you will own a specified share in the property. Your share of the property can be passed on to another person, either during your lifetime or under your Will. If you do not have a Will at the time of your death then your share will pass in accordance with the rules of intestacy. It is therefore important that you make a Will at the same time to make sure what you want to happen can actually happen legally.
If you wish to hold the property as tenants in common, then a declaration of trust should be drawn up when you purchase the property stating each co-owner's individual share. Your shares may be equal, but they do not have to be, if for example, one of you has paid more of the deposit etc. The declaration of trust can provide for a percentage split of the ownership of the property or even for a formulaic split based on contributions at the start and then throughout the ownership of the property.
Holding the property as tenants in common may be appropriate if, for example, you have children from previous relationships and would prefer them to inherit your interest of the property on your death rather than your co-owner.
How you wish to hold the property must be your own decision and is something that you should keep under review following the purchase of your property and, especially, if you decide to later separate.
If you decide to hold the property as joint tenants but then wish to split your interests (for example because you have separated) then the joint tenancy can be "severed" by written notice and turned into a tenancy in common at any time. Unless you then have a declaration of trust setting out the shares each person owns, there will be a presumption that you own the property equally which may not be your understanding if you have provided more money for the property than your co-owner has.
If you do decide to later sever the tenancy of the property the act of severance should be reported to the Land Registry who will record the change on the title deeds of the property.