Are you buying a house with your partner?
Are you unmarried?
Not to be confused with the term "Shared Ownership" which we will come onto later in this guide.
It is very likely that when purchasing a house with your partner that one of you may have a larger deposit than the other. In today’s economic climate it is very common that a parent will also contribute towards house deposits due to the increasingly large deposits which lenders require.
It is therefore understandable wanting to protect your investment in the event of a separation or the death of one of you.
Under a joint tenancy each owner will have an equal share in the property, and upon the death of one of them his or her share will automatically pass to the other or others. This rule will still apply even if the deceased made a Will and purported to leave his or her share to someone else.
Tenancy in Common
Under a tenancy in common, co-owners can have either an equal share or an unequal share in the property (eg 60% to A, 40% to B). In the event of the death of a co-owner the share of any deceased owner does not automatically pass to the survivor but will be dealt with under the terms of his or her Will or the intestacy rules if there is no Will.
Which should we choose?
Most husbands and wives will opt for a joint tenancy because they would want the survivor of them to inherit the property automatically on the death of the first of them to die. However, this general rule does not always apply and in the following circumstances, husbands and wives should consider whether a tenancy in common is more appropriate:
- if they have substantial joint assets, in which case significant inheritance tax savings can be made by the preparation of a suitable Will coupled with a tenancy in common;
- if either the husband or wife has been previously married and has children from that former marriage who are intended to benefit on their parents death.
Joint owners will normally opt for a tenancy in common if they are unrelated, (but very often a couple who purchase before marriage but with the intention of marriage or a permanent relationship will chose a joint tenancy).
Tenancy in common is also appropriate when:
- the property is held as a business asset;
- contributions to the purchase price, or payments of the mortgage, are made in unequal shares and the owners wish to reflect this in their joint ownership.
Declaration of trust
When co-owners decide to hold property as tenants in common, it is often sensible to set out their intentions in a separate deed known as a Declaration of Trust, particularly if the agreement between them as to ownership is complicated.
A declaration of trust can be tailor made to suit your circumstances and can indicate a fixed sum to be repaid to one party or that more than 50% of the property is owned by a single party.