These days, not everyone wants to enter into a formal relationship such as marriage or a civil partnership. Many couples simply live together. If you’re planning to buy a property together, it’s important to understand what the differences are between joint tenants and tenants in common, so that you’re not left out in the cold.
If you’re an unmarried couple who plan to buy a property, then you have a couple of options over how you register your position with the land registry. A joint tenancy means that both partners own an equal share, while tenants in common each own a specific proportion of the property.
A joint tenancy means that both partners own the whole property between them, and not just a designated part. This is the most common arrangement and for happy relationships, can be the ideal choice. If the property stays within the relationship until one partner dies then the surviving partner inherits the whole property. However, it also means that the deceased cannot leave the property (either the entire house or a part of it) to anyone other than their partner in their will.
Joint tenancies are generally simpler as it’s fundamentally a 50/50 ‘split’ between two equal partners. If the partnership ends then the options are to either sell up and split the proceeds 50/50, or for one partner to buy the other one out. This is where things can get more complicated, especially if one partner disputes the split ownership of the property. If one partner feels that they’ve contributed more towards the purchase or development of the property, then they may not be happy with a 50/50 split. In this instance, the option is to let the courts decide.
Tenants in common
This is a little more complex than the more straightforward joint tenants scenario, but if one partner is putting more into the purchase of a property then it may be a fairer option. Drawing up a tenants in common agreement allows a couple to agree on exactly who owns what. This can be fixed (for example, a 60/40 split), or revised if one partner takes on a newer and more highly paid job and consequently contributes more towards the mortgage payments. The advantage of tenants in common agreement is that if the couple does decide to split then the division of the property’s worth is much more clear-cut.
A tenants in common agreement also means that each partner can leave their share of the property to other beneficiaries when they die, including children from a previous relationship, for example.
Which is the better choice?
It really depends on the individuals. Regardless of the final choice, the most important thing is to have an open and honest discussion before you decide which path to take. It will depend on the amount of capital each person has available at the start of the venture, and the likelihood of any major financial changes further down the line. This, however, is incredibly unpredictable, so it’s important to also get some solid and impartial advice from a property law expert as well, before you make your final decision.
Of the two, tenants in common arrangements are a little more flexible and can be altered or updated if your circumstances change. While joint tenant agreements are pretty straightforward and the one that most couples go to by default, it’s worth considering a tenants in common agreement to provide a more comprehensive – and fairer – split should you break up.
Get professional advice
If you’re planning to buy a property with your partner and are not sure which option will suit you best, talk to us. Our experts can take you through the pros and cons of both tenants in common and joint tenant agreements, helping you make the right choice. Call us today.