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Joint Tenants vs Tenants in Common - Pros and Cons

23/04/2020
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.

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

Joint Tenants
(also known as beneficial joint tenants)
Tenants in Common

  • you have equal rights to the whole property (undivided share in land)
  • 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)

  • 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 vs Tenants in Common - How do you choose?

The choice of how to own property is one that shouldn't be taken lightly. You should consider the following:

  • What happens if you die? - married couples mostly share their main residence a joint tenants to allow the property to go directly to remain with their joint owner when they die. Read more here about the rules of surviorship for joint tenants. Where as joint tenancy isn't suitable for unmarried couples because upon death the deceased party may wish their property to go to their family or if there are children to their children. It is also worth considering what happens if you break-up? Your original intention to leave the property to the other joint tenant would mean that the partner you broke up with gets your property. Read below about how to sever a joint tenancy.
  • Is this an investment? - married couples can often own investment properties as buy to lets because they might have lived in it before buying their new residence; choosing not to sell it and use it as an investment. If the property is an investment then you need to consider if owning it as joint tenants is tax efficient for you. It is rare that having an exact 50:50 beneficial share is tax efficient. If you are joint tenants and want to change to tenants in common then read this article - Change from Joint Tenants to Tenants in Common.
  • What would you do if you break-up? - unmarried couples would want the flexibility to sell the property if they break up, get their money out and move on with their lives separately. The challenge arises if one of the joint owners doesn't want to sell but can't afford to buy you out. You can force a sale but this is costly and your success rate depends on your intentions for the property when you purchase. Read more on this here - Can I force the sale of a jointly owned property?.

Joint Tenancy vs Tenants in Common Pros and Cons?

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.
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 are married and 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.

Do you need a deed of trust for separate beneficial shares?

Whether you buy as Joint Tenants vs Tenants in Common you need to think through how you want to live together with you joint owner. If you are buying as tenants in common then you are best advised to draft a deed of trust to set out the intentions between the beneficial joint tenants. We offer different types of deed including:

  • 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 - Read about the Basic Deed of Trust.
  • 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 if you are married and tenants in common.
  • Floating 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 - Read about the floating Deed of Trust.

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


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Frequently Asked Questions

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

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".

How do you change from joint tenants to tenants in common?

You can sever the joint tenancy at any time to go to beneficial tenants in common. Click here to read how - Change from Joint Tenants to Tenants in Common.

How do you change from tenants in common to joint tenants?

Like the above, you can change from tenants in common to joint tenants at any time. For example, an unmarried couple who get married may wish to change from tenants in common to joint tenants on their residential home to offer them both more security. The process, however, is a little more involved so click here to read how - Change from tenants in common to joint tenants.

How do I confirm once I choose between joint ownership and tenants in common?

When you are purchasing the property your solicitor provides you the Land Registry TR1 Form to sign. When signing this you'll need to choose one of the following:

Section 10 - Declaration of trust. The transferee is more than one person and

  • they are to hold the property on trust for themselves as joint tenants;
  • they are to hold the property on trust for themselves as tenants in common in equal shares; or
  • they are to hold the property on trust: - it is here you state your beneficial interest as tenants in common in unequal shares

Once you are satisfied you understand the difference between joint tenants and tenants in common and agree your intentions with your joint owners then you can tick the appropriate box and get the TR1 signed and witnessed. Most people who choose to own the property as tenants in common also draft a deed of trust so would tick the bottom option. If you need a deed of trust or want to talk about what is included in one, please call us and we can help - 0333 344 3234 or click ask us online here.
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