Tenants in Common Explained
Have you ever come across the term ‘tenants in common’ and wondered what it means? As conveyancing experts, this is just one of the many scenarios we deal with at Alsters Kelley when helping people purchase a house, so we’re often asked about this method of property investment and how it works.
In this article, we’ll therefore explore in detail what it means to be tenants in common, how it differs from a joint tenancy and when it might be worth considering as an approach to home ownership.
What are Tenants in Common?
Tenancy in common is a form of co-owning a house with another person, or people, where you each hold a separate share in the property. Shares can be equal, or unequal, and can be divided between up to four people.
In law, each share is treated completely independently, so shareholders are free to sell or transfer their part, without first gaining permission from the other tenant or tenants.
The fact you own the property as tenants in common is something that needs to be added to the Land Registry as part of your purchase and will be included on your Title Register Document. Your mortgage provider will also have a record of this information.
Key Features of Tenancy in Common
There are a few key features of tenancy in common that distinguish it from other forms of property ownership:
- Each tenant has control over their designated share of the property
- Shares do not have to be equally held – for example, it might be a 60/40 split, or more or less
- Tenants in common have the right to sell or transfer their share independently, without the need for permission from the other tenants
- If one tenant in common dies, their share does not pass to the other tenant, it would pass automatically to their estate unless any wills stated otherwise
Advantages of Tenancy in Common
While it’s not necessarily the most obvious choice, there are times when tenants in common provide a better solution for homeowners, depending on their individual circumstances.
For example, if one person has contributed more to the purchase price, or to the ongoing expenses, or in any scenario where people aren’t necessarily sharing income and expenditure, such as friends or relatives buying a house together.
It’s also an ideal way to invest in real estate that several people might be using, such as a holiday home.
Another advantage of tenants in common is the flexibility it offers for the future in the fact that a person’s individual share passes to their estate, rather than any other co-owners. This might be a better option for a couple who have children from previous relationships and want their share of the house to pass to them, for example.
It can also be a way for people who are in a relationship but not married to still reduce their inheritance tax liability because, upon their death, only their share of the property is subject to tax liability when it passes to their estate.
Being able to sell or transfer shares independently can also be useful if one party wants to end the ownership arrangement but the other party or parties don’t.
Joint Tenancy Vs Tenants in Common
Another form of co-ownership, which people are probably more familiar with, is joint tenancy. There are various ways in which tenants in common differ from a joint tenancy. While you can still have between two and four people in a joint tenancy, individual shareholders can’t suddenly decide they want to do something different with their stake. Any decisions to sell or exit the co-ownership need to be agreed by all parties.
Depending on your situation, this could be seen as either a positive or a negative. The thought of someone being able to sell their half of the house to someone else, or perhaps even taking a loan out on their share, could seem like a very daunting prospect to some. With tenants in common, a shareholder can force a sale by applying to the courts for an ‘order for sale’, even if the others don’t want to sell.
However, you can get tenants in common agreements drawn up to legally set out how you would approach the scenario of a co-owner wanting to sell, and this is something worth doing at the beginning to protect all parties from unanticipated eventualities down the line.
Another significant difference with a joint tenancy is that if one of the owners dies, their share will automatically pass to the other tenant, rather than their estate. This is known as the automatic right of survivorship.
Alsters Kelley Conveyancers can help
As a high quality accredited conveyancing firm, we have a great team of solicitors who have helped thousands of people buy and sell homes across the Coventry and Warwickshire area.
Our conveyancing solicitors are experts in all manner of scenarios when it comes to the legal quirks and complexities of buying a house and can help you navigate the process as smoothly and stress-free as possible, no matter what your individual circumstances.
So if you’re looking to buy a house in 2023, and you want the help of fast and reliable solicitors you can trust, get in touch with Alsters Kelley for your conveyancing quote.
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