As you might expect there are several ways to own a property in the UK. The three main types of property ownership are Sole Ownership, Joint Tenants, and Tenants in Common. There are benefits and weaknesses to each of these types of ownership and it is always recommended to take advice as to which is best for you.
What is Sole Ownership?
In many ways Sole Ownership is the most straightforward form of property ownership. Only one individual is the legal owner, possessing 100% of the property. Unless there is a change against the property, for example a mortgage, nobody can lay claim to any part of it.
A person who has contributed to the purchase price of the property and is not the sole owner can establish a beneficial interest in it. This is, however, complicated and requires specialist legal consultation.
If the sole owner is in a relationship, perhaps even married, their partner / spouse is not on the deed and therefore will not automatically inherit the property should the owner pass on. The property will only be passed on in accordance with the owner’s Will.
What is Joint Tenancy?
Joint Tenancy is the most common form of property ownership. It is this form of ownership which is most often used by couples. With this form of ownership both partners in the relationship own the property together, with neither of them having a specific share of the equity. In fact anyone can create a joint tenancy, not just married or non-married couples, for example friends, businesses associates, or relatives. Both parties will be named on the deed.
Joint Tenancy includes what is known as the ‘right of survivorship’. This is where, should one of the owners pass away, the other inherits 100% of the property automatically. While this might seem ideal it can and does have some inherent pitfalls.
Because the property will pass in its entirety to the surviving partner, there is no way of securing a share for anyone else, for example children. This in turn can lead to what is known as sideways dis-inheritance. For an explanation of sideways dis-inheritance watch this video.
What is Tenants in Common?
Slightly more complicated than Joint Tenants, Tenants in Common is a form of ownership where each partner in a couple has a specific share in the property. This is most usually 50% / 50% but does not necessarily have to be so. While this may appear to be the same as Joint Tenants a key difference is that neither party automatically inherits their spouse’s share should they pass away.
This allows both individuals to plan who they leave their share of the property to when they pass away, independent of the other. This often includes leaving their share in Trust for their children while the surviving partner can also still live at the property.
The benefits of Tenants in Common are fully realised with a Will and a Property Protection Trust, where each party can document their wishes for their half of the property independently of each other. If the shares are not split 50% / 50% it is also advised to seek further advice from a solicitor and enter into a Declaration of Trust.
Choosing the most appropriate form of property ownership requires taking expert legal advice and making the best decision for you.
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