In this post, we’re not discussing why you should own a property with someone else, but HOW you should own a property with someone else. When buying a property in your personal name with someone else there are two different ways to own it – ‘Joint Tenants’ or ‘Tenants in Common’. So, what do these terms mean, and what’s the difference?
What is a Joint Tenant?
With joint tenants, you own the whole property together, and not just a specific share of that property. As a joint tenant:
- You own the entire property with your co-owner, in ‘undivided shares’.
- You can’t leave your ownership in the property to just anyone in your will. It automatically passes straight to your co-owner, or owners, when you die. It doesn’t matter what you have in your will, it goes straight to the other owners. So, if you’d like to leave your property to all the stray cats in the neighbourhood, this sort of ownership model isn’t for you. Hard luck, cats.
- It doesn’t matter who puts the most money into the property, the whole of the property is still owned together.
The joint tenant model is good for couples. But it’s not so good if you own the property with a friend or colleague and would like to pass your share onto someone else when you pass away.
What are Tenants in Common?
Tenants in common also own property with their co-owner(s) but they own a clearly defined share of the property. As a tenant in common you can:
- Record a share which shows unequal contributions to the property. If you pay more towards the house than the other owner, you get a bigger share of the house. (Small disclaimer here – this doesn’t necessarily apply from the relationship property standpoint so have a chat to us if you’d like to protect an unequal contribution to property owned with your partner).
- Leave your share of the property in your will to whoever you want. It doesn’t automatically pass to the other owner(s).
- Keep your share separate from other owners.
The tenants in common structure is better suited to your needs if you own a property with a friend, a colleague, or a family member other than your better half, such as a sibling or a cousin. You might not want your share to pass automatically to them. You might want those stray cats to inherit your share. Under this structure, you can do that. Lucky cats.
Of course, when you use a will to disperse your worldly goods to felines or humans, you must ensure it is regularly updated to reflect your wishes. This is particularly important for tenants in common.
Lastly, one further consideration with tenants in common is to think about what happens if your co-owner dies. Do you want to have the first right of refusal to purchase it? It might just happen that you end up co-owning the property with someone you don’t know. We recommend that parties owning property with people other than their partner should think about property sharing agreement to set out who pays for what expenses and any first right of refusal if any party wishes to sell their share (or on their death).
For more information, check out our Buyers Road map or get in touch with us for some sound HOW TO advice.