Co-ownership of Property

Most people are not aware of the different types of joint ownership available. But when you tell the Land Registry, it will affect what you can do with the property if your relationship with a joint owner breaks down, or if one owner dies.

So getting some professional advice from the experts before you buy could save you some heartache down the line. Our Professional and friendly advisers can discuss the options available to you. So when you embark on what is probably your largest of financial commitment, you’ll be able to take advantage of all the benefits and avoid the pitfalls.

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When you purchase a property in more than name, it’s best to be really explicit about who owns what. The most secure way to do this, is to prepare a Declaration of Trust. This can include the decision as to whether you hold property in equal shares – 50:50 or some other proportion such as 70:30.

All too often the importance of this document can be overlooked until there is either a disagreement between the co-owners or with a third party such as a trustee in bankruptcy.

There are two types of co-ownership structure.

Joint tenants

As joint tenants (sometimes called ‘beneficial joint tenants’): both of you have equal rights to the whole property but the property automatically goes to the other owners if you die so you can’t pass on your ownership of the property in your will to a third party.

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Tenants in common

As tenants in common the property is treated as an asset in which the co-owers each take a share. You can own different shares of the property and the property doesn’t automatically go to the other owners if you die. So you can pass on your share of the property in your will if you wish to a third party.

We find that increasingly the tenants in common option is appealing because of the continued increase in property prices mean co-owners often get financial help from family or friends when buying a property. So if the property passes to a joint tenant, this could leave a private lender out of pocket.

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Here is an example:

Joan & Paul buy 12 Smith Street for £250,000. They get a mortgage of £150,000 and the sum of £100,000 is contributed by Paul’s parents, The Goobers.

The property will be held in the joint names of Joan and Paul who both have the powers of an absolute owner and can force a sale or postpone a sale. A Declaration of Trust will state that the property, whilst owned by Joan and Paul is held on Trust for Joan, Paul and The Goobers. Further, when the property is sold it will concisely set out the division of the proceeds which may include the sum of £100,000 being returned to The Goobers or even its equivalent percentage contribution i.e. 40% of the property value.

Don’t worry if you are Joint tenants and wish to change or update your ownership structure. Change your type of ownership. For example, in cases where the joint tenants divorce or separate and want to leave their share of the property to someone else or, if you marry and wish to change from tenants in common to joint tenancy.

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You can also change from sole ownership to tenants in common or joint tenants, eg if you want to add your partner as joint owner. This is called transferring ownership.

As well as dealing with the contributions made to the purchase price, the Declaration of Trust can also clarify other expenses which avoids disputes down the line. The list below outlines some of the options.

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Outgoings – It should be agreed as to whether or not a party who pays outgoings e.g. insurance should be reimbursed.

Repairs –  It should be agreed as to whether or not one party has the obligation to carry out repairs and pay costs and then reimbursed from the proceeds.

Power of sale –  It can limit the powers of the trustees such as place restrictions on when a sale is to take place. But, this will only bind the parties, not a mortgagee.

Mortgage payments –  It can document who is to be responsible for paying these and whether there should be reimbursement on sale.

Continuing Residence – Whilst an unmarried couple may wish for their share of the property to pass to their loved ones following death, they may want to give their co-owner a right to live in the property for as long as they wish.

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