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Joint Tenancy vs Tenants in Common - Pros and Cons

16/08/2018

Choosing whether to buy as Joint Tenants vs Tenants in Common is an important decision because it affects how you share income from the property; although you can change from joint tenants to tenants in common (and the other way around) in the future (click to find out how).

To understand the pros and cons regarding joint tenants and tenants in common there are two key principals to understand:

Joint Tenants	Tenants in Common
Also known as beneficial joint tenants you have equal rights to the whole property the property automatically goes to the other owner if one of the joint tenant dies you cannot pass on your ownership of the property in your will to anyone other than your surviving partner in the event that you die first (if you yourself are the surviving partner, all the property goes to you and you can then transfer your share of property to anyone in your will)	A separate share that you can give to anyone you can own different beneficial shares of the property (for example 50/50 or 99/1) the property doesn't automatically transfer to the other joint owner if you die you can transfer your share of property to anyone in your will

Joint Tenants

Tenants in Common

Also known as beneficial joint tenants

you have equal rights to the whole property
the property automatically goes to the other owner if one of the joint tenant dies
you cannot pass on your ownership of the property in your will to anyone other than your surviving partner in the event that you die first (if you yourself are the surviving partner, all the property goes to you and you can then transfer your share of property to anyone in your will)

A separate share that you can give to anyone

you can own different beneficial shares of the property (for example 50/50 or 99/1)
the property doesn't automatically transfer to the other joint owner if you die
you can transfer your share of property to anyone in your will

What are the Pros and Cons of Joint Tenants?

Pros	Cons
In the event of death the surviving joint tenant owns the property 100% - if tenants in common the deceased's estate would look to sell the property in order to release the equity due to the estate. Simple beneficial ownership - joint tenants own the property 100% so they share income equally 50/50. Costs less in legal fees - solicitors charge more for drafting a deed of trust and to register the restriction. No need to draft a will - if your home is your only asset and your intention is to leave it to your joint tenant (husband or wife or civil partner) then you may not need to draft a will. No need to declare a From 17 - any rental income from property is shared 50/50 and as such there is no need to declare to HMRC.	Risk in relationship breakdown - joint tenants own the property 100% in one indivisible share so if one party pays more than the other to buy the property this is not recognised and any gain or loss is shared equally. Can't use a joint tenancy agreement - you cannot have a deed of trust when buying as joint tenants. Harder to force a sale - if you live in the property as joint tenants you will struggle to sell the property without mutual consent forcing you to go to court to seek a court order.

Pros

Cons

In the event of death the surviving joint tenant owns the property 100% - if tenants in common the deceased's estate would look to sell the property in order to release the equity due to the estate.
Simple beneficial ownership - joint tenants own the property 100% so they share income equally 50/50.
Costs less in legal fees - solicitors charge more for drafting a deed of trust and to register the restriction.
No need to draft a will - if your home is your only asset and your intention is to leave it to your joint tenant (husband or wife or civil partner) then you may not need to draft a will.
No need to declare a From 17 - any rental income from property is shared 50/50 and as such there is no need to declare to HMRC.

Risk in relationship breakdown - joint tenants own the property 100% in one indivisible share so if one party pays more than the other to buy the property this is not recognised and any gain or loss is shared equally.
Can't use a joint tenancy agreement - you cannot have a deed of trust when buying as joint tenants.
Harder to force a sale - if you live in the property as joint tenants you will struggle to sell the property without mutual consent forcing you to go to court to seek a court order.

Who is most likely to buy as joint tenants?

Married couples. The reason married couples buy as joint tenants is so that on their death the property transfers to their partner. It is also because a married couple's property is viewed to be jointly owned equally unless stated otherwise. HM Revenue and Customs state "If you live together with your spouse or civil partner, we normally treat income from property held in your joint names as if it belonged to you in equal shares and tax each of you on half of the income, regardless of actual ownership". For more information read the HMRC note on - Form 17 Income Tax declaration of beneficial interest in joint property and income

It is unlikely that an unmarried couple, joint family owners or friends would want to share the property as joint tenants because in each scenario the individuals may have invested unequal shares, they might break up or they might choose to have another partner who may make a claim to the property. Read our article - Splitting up with partner? Are you due money from the property?

It also suits married couples as you can only have 2 people jointly buying as joint tenants, whereas with tenants in common you can have 2 to 4 people.

Do you need a deed of trust?

We offer a number of different deed of trusts based on the circumstances of the joint owners. These include:

Basic Deed of Trust aimed at married couples, long term relationships and family members looking to declare the individual beneficial interest and confirm an exit strategy for when either party wants to sell (click here to find out more).
Buy to Let Deed of Trust aimed at joint owners looking to share property income in a tax efficient way (to be filed alongside a Form 17 declaration to HMRC)*.
Silver Deed of Trust aimed at unmarried couples and friends and includes a more complex formula to calculate the beneficial interest over the life of the investment taking into account mortgage repayments, costs of purchase/sale and developments (click here to find out more).

Our solicitor can help you draft a basic deed of trust. For help call 0333 344 3234 (local call charges apply) or click the link below to get a quote.

Get a Deed of Trust Quote

* You should always seek independent tax advice.

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What are the Pros and Cons of Tenants in Common?

Pros	Cons
Your beneficial interest is separate and can be unequal - as tenants in common you own your own individual share of the property that belongs to you. It is advisable to draft a deed of trust to confirm what this share is. Reduced risk if there is a breakdown - as long as the joint owners have drafted a deed of trust, the risks reduce if the relationship breaks down. As joint tenants you can't create a deed of trust, however as tenants in common you can and within the deed you can include what your beneficial interest is and what happens if either party wants to sell. Easier to force a sale - if you have a deed of trust that has an exit clause then it is easier to sell the property if one party doesn't want to sell. You share goes to your estate on death - when you die you share of the beneficial interest in the property passes to your beneficiaries in your will and not the joint owner of the property.	Need to draft a deed of trust - a deed of trust details the beneficial interest share between the joint owners. A basic deed of trust costs £240 INC VAT and we can draft this for you. Need to draft a will - as tenants in common your share of you property goes to your beneficiaries on your death and not to the other joint owner. If you don't have a will then you die intestate. A basic will costs £180 INC VAT and we can draft this for you. Need to declare a From 17 - unlike with joint tenants, if you own the property as tenants in common in unequal shares then you need any rental income from property is shared 50/50 and as such there is no need to declare to HMRC.

Pros

Cons

Your beneficial interest is separate and can be unequal - as tenants in common you own your own individual share of the property that belongs to you. It is advisable to draft a deed of trust to confirm what this share is.
Reduced risk if there is a breakdown - as long as the joint owners have drafted a deed of trust, the risks reduce if the relationship breaks down. As joint tenants you can't create a deed of trust, however as tenants in common you can and within the deed you can include what your beneficial interest is and what happens if either party wants to sell.
Easier to force a sale - if you have a deed of trust that has an exit clause then it is easier to sell the property if one party doesn't want to sell.
You share goes to your estate on death - when you die you share of the beneficial interest in the property passes to your beneficiaries in your will and not the joint owner of the property.

Need to draft a deed of trust - a deed of trust details the beneficial interest share between the joint owners. A basic deed of trust costs £240 INC VAT and we can draft this for you.
Need to draft a will - as tenants in common your share of you property goes to your beneficiaries on your death and not to the other joint owner. If you don't have a will then you die intestate. A basic will costs £180 INC VAT and we can draft this for you.
Need to declare a From 17 - unlike with joint tenants, if you own the property as tenants in common in unequal shares then you need any rental income from property is shared 50/50 and as such there is no need to declare to HMRC.

Who is most likely to buy as tenants in common?

Friends, family or unmarried couples. Each individual in these groups has a separate interest than their joint owner have within the joint ownership that wants to keep their share in the property separate to their joint owner. Unmarried couples may choose to share the property as joint tenants in the future. The reason married couples buy as joint tenants is so that on their death the property transfers to their partner. It is also because a married couple's property is viewed to be jointly owned equally unless stated otherwise. HM Revenue and Customs state "If you live together with your spouse or civil partner, we normally treat income from property held in your joint names as if it belonged to you in equal shares and tax each of you on half of the income, regardless of actual ownership". For more information read the HMRC note on - Form 17 Income Tax declaration of beneficial interest in joint property and income