Tenants in Common Meaning UK

It makes perfect sense to own property with another person in some instances.

Perhaps you’re married and want to invest in property together, or perhaps you simply want to invest in property with a group of people for profit.

Either way, when people consider buying property together, they worry about what kind of joint ownership they should have.

There’s also a question of whether a tenancy in common would be a viable route to take.

This article provides an overview of tenants in common, what it is, how it works, and covers some FAQs.

What does  “Tenants in Common” mean?

Tenants in common refer to being part of a tenancy in a common contract – this means two or more people are owners of the property.

This is basically when two or more people have an interest in the same property and can leave their share to a beneficiary at the time of their death.

This doesn’t mean that you own a separate part of the property but merely have a different proportion in terms of monetary value.

For instance, you may own 60% of the property, whereas a friend of yours owns 40%.

If You Want to Buy Property with Family or Friends, Do You Need a Tenancy in Common Mortgage?

Here is the good news, if you choose to buy a property with a family member or friend, there’s no need to have a special tenancy in common mortgage.

Instead, you simply need a regular mortgage and must make use of a solicitor to draw up legally binding ownership arrangements.

Joint Tenants vs. Tenants in Common – What’s the Difference?

Whether you decide to be joint tenants or tenants in common will come down to several things, such as the individual you wish to co-own real estate with and, of course, your specific situation.

However, if you want to avoid facing issues in the future, it’s important to carefully consider which of the two options is ideal for you.

To ensure that you’re able to make an educated decision, consider the main differences between joint tenants and tenants in common. These are explained below for convenience:

  • Tenancy in Common

When there’s a tenancy in common agreement in place, when one of the owners become deceased, the portion of their property is passed over to a named beneficiary in their last will and testament.

Another thing to note is that tenants in common own a percentage of a property. This is helpful in instances where one owner will contribute more money than the other in the deposit or even the total cost of the property.

With a tenancy in common, a new co-owner can be added to the tenancy in common at a later stage. A new co-owner can be added even years after the original tenancy in common is set up.

  • Joint Tenancy

In the case of a joint tenancy, when one of the property owners passes away, the ownership portion is automatically given to the surviving partner, even if the co-owner has stipulated otherwise in their will. This is called Rights of Survivorship which is specific to joint tenancies.

Another thing to note is that joint tenants each own the whole value of the property. That means they both own 100% of the property.

As all the joint tenancy owners are listed on the same title deed, and they are seen as one legal entity, it makes sense that the property simply remains the possession of the surviving partner when one party passes away.

Of course, this means that all parties must enter the agreement at the same time.

Rules that Apply to Both Tenants in Common & Joint Tenancy

When trying to decide between a tenancy in common and joint tenancy, you may wonder what rules you may have to adhere to. Below are two rules that apply to both types of property ownership contracts:

  •  The property cannot be sold unless both co-owners agree to it.
  • Co-owners must sign a joint mortgage instead of taking out separate mortgages.

Percentage Ownership Options Pertaining to Tenants in Common

When it comes to, joint tenancy each co-owner owns 100% of the property. It’s a little different from a tenancy in common in that you each own a different proportion of the property.

Together, this adds up to 100%. How you work out the percentages will be up to you and your co-owners. The percentages of ownership should always be stipulated in the agreement because if it is not, it is legally assumed that each owner has an equal amount of ownership shares.

Can I Transition From Sole Owner to Tenants in Common or Joint Tenants?

Property owners who want to include a new owner on their property can change their sole ownership to tenants in common ownership fairly easily. It is also fairly simple to transition from joint tenants to tenants in common.

To change to a tenancy in common from a joint tenancy, the owners must go through a “severance of tenancy” process and then apply for what is called a “Form A Restriction. This is sent to the HM Land Registry’s Citizen Centre for review.

Here’s the interesting part! If you wish to change to a tenancy in common from a joint tenancy, you don’t need to obtain permission from all owners.

If you can’t agree, you are entitled to serve the other others notice of severance. You will need to acquire the relevant forms and ensure the required supporting documents. It’s best to work with a solicitor or legal executive, which will cost you.

The process itself, however, is free. Using a solicitor ensures that everything is handled legally and above board – safeguarding both you and the other parties.

While some people may see no immediate reason why they would ever need to make changes to their ownership format, it’s best to err on the side of caution.

There are instances where changing the ownership format and contract makes sense. For instance, if you plan to separate or divorce from your partner or if you wish to leave a portion of your property to another person.

Expected Disadvantages of Having a Tenancy in Common

One thing to be aware of is that the tenants in common contract is not well suited to every person.

It’s best to consider all of your options and the possible disadvantages before determining if this is the right course of action for you.

There are disadvantages to be aware of before you get yourself into such a contract. These include:

  • If one of the property co-owners passes away and doesn’t have a will in place stipulating their beneficiary, the property will go through probate, which is costly and a lengthy process.
  • If you co-own the property and one of the co-owners wishes to sell the property and you don’t, you may be served with a partition action. This could mean that you’re forced to sell the property.

It’s best to be aware of these disadvantages before getting into a tenancy in common to avoid these particular risks.

Tenants in Common Final Thoughts

Tenants in common can be a great ownership option for two or more people who wish to co-own property together.

That said, before you jump into the agreement, make sure that all parties are aware of how it works, what to expect, and the associated risks along the way. This will ensure that there are no nasty surprises or any confusion along the way.

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