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Joint tenants and tenants in common

This article explains how property may be held in England and Wales by more than one owner.

Joint Tenants

Where a joint tenancy exists, none of the co-owners will own a distinct or separate proportion of the interest held; together they effectively own all of it. Of particular importance is the fact that where one of the two joint tenants dies, their share will automatically pass by survivorship to the survivor, irrespective of any wishes that may be expressed in the deceased’s Will.

The Law of Property Act 1925 states that some assets can only be held by way of a joint tenancy.

Example

Mr and Mrs Ellis own a house worth £400,000. They own this as joint tenants. This means that neither of them owns an individual share of the house. On the death of Mr Ellis, Mrs Ellis will automatically own 100% of the house due to the operation of the joint tenancy which means that the surviving owner receives 100%. This passes outside of Mr Ellis’ estate and therefore the provisions of his Will (or intestacy) are not relevant in this respect with regards to the distribution of assets, but the value of his share of the house needs to be taken into account when valuing his estate for inheritance tax purposes.

It is possible to have more than 2 people as joint tenants. For example executors or trustees may own a property as joint tenants and there may well be more than 2 people in such a situation.

Tenants in Common

A tenancy in common is the opposite of a joint tenancy and each co-owner owns a definite share in the property.

Under this form of ownership property can be held in equal shares or unequal proportions.

If one co-owner dies, their share will pass in accordance with their wishes expressed in their Will, or if a Will is not made, in accordance with the rules of intestacy and not automatically by survivorship.

Example

Mr Jones and Mrs Smith purchase a property together. Since both have decided that upon their death their share in the property should pass to their respective families they decide to own the property as tenants in common in equal shares.

To avoid any possible disputes it is preferable that the shares of each co-owner be expressed and recorded in a separate deed known as a declaration of trust, especially if unequal shares are owned in the property. This is then a legal document which will then clearly indicate the ownership rights of each of the parties.

Example

Mr Cartwright purchases a property together with his sister, Mrs Hardy. Mr Cartwright contributed more to the purchase price than Mrs Hardy and therefore they decided that that they wish to reflect this in the proportions that they hold in the property. They could therefore achieve this by a declaration of trust which is a legal document which can clearly identify the individual shares in the property so that Mr Cartwright could own 60% and Mrs Hardy could own 40% for example.

It is important that in both situations described above involving tenants in common that all parties have Wills since their shares will be disposed of in accordance with their Wills. If they do not have Wills then their share in the property along with their other assets will be distributed in accordance with the intestacy rules.

Which form of ownership should be used?

This depends upon the circumstances of each case. However, between married couples generally a joint tenancy is preferred since often the intention is for assets to pass between them in any event.

A tenancy in common is often used where unequal contributions have been made for example towards the purchase price of a house or where one co-owner would not want their interest to pass automatically to the survivor on their death, for example where property is owned by brothers and sisters.

Life Assurance

In respect of Old Mutual UK and International life assurance policies, the legal ownership will be held as joint tenants. It is not possible to hold this type of asset as tenants in common since it is what is known as a ‘chose in action’ which means a personal right rather than having physical possession. It is possible, however, to hold the beneficial ownership on trust for beneficiaries and to identify the shares that they are to hold.

International Aspects

There are a number of international considerations which should be taken into account when thinking about joint policies.

Often the concept of joint tenants is not recognised in civil law jurisdictions (i.e. Continental Europe) and therefore as a result there is uncertainty over who can benefit from a policy and who can exercise the policy options (including surrender) during lifetime and on the death of policyholders and/or lives assured. For example in Belgium, the concept of joint tenants is not recognised.

Another aspect for consideration is that a large number of European countries operate a system known as ‘matrimonial property’ or ‘community property’. Under this system each spouse would automatically acquire a fixed property right in respect of assets acquired during marriage for example.

The information provided in this article is not intended to offer advice.

It is based on Old Mutual Wealth's interpretation of the relevant law and is correct at the date shown at the top of this article. While we believe this interpretation to be correct, we cannot guarantee it. Old Mutual Wealth cannot accept any responsibility for any action taken or refrained from being taken as a result of the information contained in this article.

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