Does it matter how you own a property?
For all those people who own or are looking to buy a property with someone else, you need to be clear how you hold the property and the differences because the implications can be severe.
Types of ownership
If you own a property with another person, there are two ways to hold the title.
This is subject to the rule of survivorship which means that if one of the co-owners dies, their share will automatically go to the surviving co-owner(s) outside of the estate of the deceased co-owner.
It is usually the case that the owners will hold the property in equal shares and is typically used by couples.
2.Tenants in Common
In contrast, under this type of ownership, the share of the deceased co-owner will be shared accordingly to either a Will (if any) or the rules of intestacy.
The shares between the owners can be unequal and this type of arrangement tends to suit people who have bought with family members or friends.
When you buy a property, your conveyancing solicitor will ask you how you want to hold the property and explain the differences. In absence of your clear instructions, they will normally default to joint tenancy.
The good thing is that if the title is held as one or the other, it is not too late to alter this or rectify a mistake.
The most common scenario that I come across is where an unmarried couple, unaware of how they held the property, is seeking advice following the relationship breakdown, and the first thing I would recommend is to ‘sever’ any joint tenancy, because their ex-partner will inherit their share on their death whether they intended this or not.
To do so you just need to serve a Notice of Severance on the co-owner and complete and file a form SEV (and potentially RX1) with the land registry. The good thing is that you can do this without the consent of the joint owner. It’s a relatively simple and low cost step but will have serious consequences.
To change from tenants in common to joint tenants is slightly more complicated and you will need the agreement of all co-owners. A guide to the steps is provided here https://www.gov.uk/joint-property-ownership/change-from-tenants-in-common-to-joint-tenants.
My top advice in situations where you are buying with another person is to record your agreement in a formal document known as a ‘Declaration of Trust’. This is more so, if there are unequal contribution between the owners, and corresponding going to be unequal division on sale or transfer of the property.
A Declaration of Trust is important to record at the outset each owner’s responsibility and their rights in respect of the Property. It will be a key document in the event of a breakdown in the relationship and any disputes over the Property.
Word of warning
I see day in and day out claims relating to ownership of properties. Given the investment a property represents, so many of my clients would have saved the time and expense of remedial advice and assistance, if they had sought advice and assistance before embarking on the purchase.