What does ‘joint tenants’ or ‘tenants in common’ mean on death?
When I meet with clients to discuss a deceased relative’s estate and ask if they know if the property they co-owned with their husband/wife was owned as ‘joint tenants’ or ‘tenants in common’ I am often told that they own the freehold so they are not ‘tenants’ or simply that they are both on the title deeds. There is a misunderstanding as to the type of ownership that is possible between co-owners of property and what this means if one of the co-owners dies.
Under property law, a property which is owned by two (or more) people can be owned in either of two ways – as ‘joint tenants’ or ‘tenants in common’. In both cases, the names of the owners appear on the title deeds but the two different ways of owning property together have significantly different effects when one of the owners dies.
Where a property is owned as joint tenants, when one of the owners die the property automatically pass to the surviving owner, regardless of what the Will of the deceased owner says. This is known as a ‘right of survivorship’. This is the most common way a property is owned by husband and wife or civil partners. On death of one of the owners the survivor simply needs to provide a death certificate to the Land Registry and the title deeds will be changed into the sole name of the surviving joint owner who then becomes a sole owner.
Tenants in common
Where a property is owned as tenants in common, this means that each owner has their distinct share of the property. In the absence of a document which lists what share is owned by which owner it is assumed that each owner owns an equal share. In the case of a husband and wife who own their property as tenants in common, they will be deemed to own 50% each. With this type of ownership, there is no right of survivorship, so the property does NOT automatically pass to the surviving owner but instead will pass according to the deceased owner’s Will.
Some of the main reasons for owning property as tenants in common are:
- Business partners – where each business partner wants their share of the property to pass to their family in accordance to their Will as opposed to the other owner who may be just their business partner.
- For a married couple who have children from a previous relationship and they want their share of the property to pass to those children instead of passing to the new spouse (but allow the new spouse the right to live in the property for the rest of their life, known as a life interest).
- As tax planning – allowing the share of the property owned by the deceased person to pass into a family trust instead of passing to the co-owner.
- As care home fee planning – if a deceased spouse’s share of the house passes to the surviving spouse, that surviving spouse then owns 100% of the house which can, in turn, be subject to assessment for care home fees. Whereas, if the first spouse to die leaves their share to another family member or to a trust, the surviving spouse will only have their half share of the house for assessment for care home fees, leaving the first half out of the assessment.
- Un-married co-habitees who want to protect their share of the property in case they split up or don’t want their co-habitee to inherit their share of the house in the event of death.
Declaration of trust
In many of these situations, it is highly advisable the tenants in common have a declaration of trust in place. This is a document which lists what share each owner has. The document can also contain other provisions such as who pays the outgoings, what happens if one of the co-owners wants to sell the property etc. This type of document is also used to document parents making a contribution towards the purchase of the property such as helping their children with the deposit, to make sure they get their money back.