Buying with a partner or a friend? OnTheMarket reveals 10 top tips to consider around joint ownership.
Joint ownership of a property may seem quite straightforward. You and your partner buy a house together and, after that, everything is hunky-dory unless the relationship goes pear-shaped. Even then, there is no problem. You just sell the property and split the proceeds 50-50.
If only it really were that simple. In fact, joint ownership is full of many complex legal nuances, so it is wise to acquaint yourself with some of them before signing on the dotted line with the love of your life.
See below 10 top tips to consider:
1. Properties, whether leasehold or freehold, can be jointly owned by two or more people either as joint tenants or tenants in common. They are not quite the same thing and you need to work out which type of joint ownership arrangement suits you before a property is registered with the Land Registry.
2. If you buy a property with someone else your solicitor will draw up a ‘declaration of trust’ which will clarify whether you and your partner are ‘joint tenants’ or ‘tenants in common’. “That clarity is important because it makes selling a property later comparatively straightforward,” says Nick Alderman, partner at Knight Frank.
3. Joint tenants have equal rights to the whole property and if one owner dies, the other automatically inherits the whole property. A joint tenant cannot pass on his or her half-share of the property to someone else in their will.
4. Tenants in common do not necessarily have to own equal shares in a property. For instance, one could own 75 per cent, the other 25 per cent. And their share does not automatically go to the other in the event of their death. They can bequeath it to someone else in their will if they wish.
5. Nothing is set in stone. Tenants in common can become joint tenants, and often do – if they decide to get married, for example. Similarly, joint tenants might decide to become tenants in common, which offers greater flexibility in the event of divorce or separation. Note that this does not have to be done by mutual consent. One joint owner can serve what is called a ‘notice of severance’ on the other owner.
6. It is also possible for the sole owner of a property to transfer the ownership to joint ownership, whether as joint tenants or tenants in common. This step is often taken when couples move in together.
7. Joint ownership is particularly beneficial in the case of second homes, on which capital gains tax is payable. If the properties are jointly owned, both parties can take advantage of their capital gains tax allowance of £11,100.
8. The 50:50 split in the case of a property co-owned by joint tenants also extends to any rental income that may accrue from the property.
9. In the event of one joint owner of a property ‘losing mental capacity’, and being judged incapable of signing legally binding documents, the other owner has to apply to the Court of Protection before he or she can sell the property.
10. It goes without saying that, when acquiring a property jointly with someone else, you should always take expert legal advice and mull over the various joint ownership options.
Many couples have lived together happily in the same property for years and would be unable to tell you if they were joint tenants or tenants in common. They probably see it as an academic point. But it may be worth clarifying your own situation in case of unforeseen developments in the future. Time spent on research is never time wasted.
You can find further information on the government’s website.
