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If you are buying a property with another person then you should consider how you will legally hold the property.

Different types of ownership

There are two ways in which a property may be held by co-owners:

  • Under a joint tenancy
  • As tenants in common

Joint Tenants

Under a joint tenancy you would hold the property together in an indivisible share. Upon the death of one co-owner, the property automatically passes to the surviving co-owners, no action is needed to effect the transfer other than to record the death of that person.

Tenants in Common

If you hold the property as tenants in common then each co-owner has their own distinctive share in the property. Upon the death of a tenant in common that person’s share in the property will pass under their Will or to their next of kin if a Will does not exist.

The main benefit to holding the property under a tenancy in common is that you are able to specify the amount of the share that each co-owner has in the property. This means that the elected shares can reflect each owner’s financial contribution to the property and is particularly useful if unequal contributions towards the purchase price are made. If you are putting in 70% of the purchase price then you may want to ensure that your share in the property reflects this contribution.

Declaration of Trust

If you decide to hold the property as tenants in common then you also might want to consider entering into a declaration of trust. A declaration of trust is a separate document which sets out the amount of the shares that each co-owner has in the property and any other arrangements relating to the onward sale of the property.

It is always advisable to make a declaration of trust if the intended arrangements are rather lengthy or complex. Determining the amount of each share in the property may not just be as simple as looking at the contributions to the purchase price. If you are obtaining a joint mortgage with the other co-owners then you may not know at the outset the amount that each co-owner will make towards the mortgage payments. A declaration of trust can govern how the shares in the property may be decided depending on mortgage payments and other financial contributions that are made during the period of ownership.

Converting to Tenants in Common

If you decide to hold the property as joint tenants and down the line your circumstances change or you decide that you would prefer to hold separate shares as tenants in common then you have the option of what is called “severing your joint tenancy”. This means that you split the joint tenancy into separate distinct shares.

This conversion can be initiated by mutual agreement between the co-owners or by the conduct of one co-owner alone.A joint tenancy will also be automatically converted to a tenancy in common in certain circumstances, e.g. the bankruptcy of one owner.

Making your decision

In order to avoid any disputes or uncertainties down the line it is extremely important that you have a discussion at the outset as to how you intend to own the property. Your decision should be correctly documented at the time the purchase is completed.

Your Conveyancer will ask you at the beginning of the transaction how you intend to hold the property and you should ensure that you keep them informed if you change your mind. Your Conveyancer will be on hand to offer any further advice that you may require in order to make your decision.

Contact us

Contact our Conveyancing team today to find out how we can help, or to ask us about our conveyancing fees, by calling 0808 1685 643, fill out an online enquiry form, or email getmoving@ramsdens.co.uk and we will be in touch.