Welcome to Thinking Outside the Blog

Joint property ownership: Why choosing the right type is so important

Hannah


Hannah-Marie, Senior Underwriter

Published 06.02.2019

Purchasing a new property, whether as a first-time buyer or as an experienced landlord, is probably the biggest financial commitment any of us will ever make in our lives.

If your customer is buying a property as a home to live in as a couple or a buy to let investment with a business partner, it’s essential they choose the right type of joint ownership that reflects their situation. The type of ownership affects what a customer can do with a property if their relationship with a joint owner breaks down or if one of the owners dies.

Many customers aren’t sure of the differences between Joint Tenants or Tenants in Common which is why confusion can sometimes happen. For example, many people assume a property will automatically go to their partner in the event of their death or they’ve got equal rights to a property in the event of a divorce. However, this is not necessarily the case, which is why customers need to carefully consider which type of ownership best suits their personal circumstances and their relationship with their fellow buyers.

For joint borrowers where one party is in a lower tax band, there may be tax advantages to structuring ownership to Tenants in Common as they can determine the shares they own to favour the lower band individual.

Customers considering Tenants in Common should always speak with a suitably qualified tax advisor and take legal advice before making any decisions.

At Precise Mortgages, our ICR calculator is designed to take individual tax circumstances into account, meaning customers who decide this is the right option for them could achieve the loan size they want. It could also lead to a wider product choice.

So which ownership type is right for your customer? Understanding the differences between the types of ownership is key and can be summarised as follows:

Joint Tenants

  • Each owner has equal rights to the whole property
  • If one joint owner dies, property ownership automatically goes to the surviving owner
  • For the property to be sold, both owners must first agree to the sale and any proceeds from the sale are split equally
  • A joint owner cannot pass on their ownership of a property in their will

Tenants in Common

  • Ownership doesn’t have to be split 50/50: borrowers can own differing shares of the property
  • Property ownership does not automatically switch to the remaining owner if one joint owner dies
  • Once both owners agree to sell the property, the proceeds are split depending on the number of shares each owner has
  • Joint owners can pass on ownership of the property in their will

It’s worth pointing out that customers can change ownership type between Joint Tenants and Tenants in Common and vice versa by getting in contact with Land Registry.

  • For example, if customers who purchased as Joint Tenants divorce or separate and then want to leave their share of the property to someone else, they can switch to Tenants in Common
  • Conversely, if Tenants in Common get married and want to have equal rights to the whole property they can request a change to Joint Tenants

To learn more about Precise Mortgage’s bespoke ICR, speak to our dedicated intermediary support team on 0800 116 4385 or for more information visit https://www.gov.uk/joint-property-ownership.


For intermediary use only
BBR 0.75% / 3 month LIBOR 0.85%