Buying a property with others – Joint tenancies and tenancy in common explained

When buying property with another person it is important to understand the difference between joint tenancy and tenancy in common to avoid unforseen issues and costs.  The legal manner in which you own property with others determines whether the property is to pass to beneficiaries under your Will or whether it will become the property of the other owners on your death.

When buying property with others it is fundamental that the manner of co-ownership is correctly stated on the legal transfer form. There are two types of co-ownership, being Joint Tenancy and Tenants in Common.

Joint Tenants

Under this form of co-ownership no party has a specific share in the property.  The effect of this is that the joint tenants have an equal interest in the property.

On the death of one joint tenant the surviving owner(s) automatically owns the property no matter what provision is made in the Will of the deceased joint owner regarding the property. This is referred to as ‘survivorship’.  Joint tenancy is normal in marriage or domestic relationships where the parties want to hold the property equally and when they die they want the property to automatically pass to their surviving partner.

Tenants in Common

Under this form of co-ownership, property is held in common with others but when one party dies their interest passes to the beneficiaries under their Will and does not automatically pass to the surviving tenant or tenants in common. Each owner has a separate interest in the property which they can sell, mortgage or dispose of by Will. If either owner dies, his or her share of the property does not automatically pass to the other owner, but forms part of his or her estate. It will pass to the beneficiary under his or her Will if a will has been made, or to the next-of-kin if no Will has been made.

Tenants in common have fixed, undivided shares in the property.  Tenants in common can have unequal shares (for example, two-thirds to one and one-third to the other).

Whilst stamp duty is generally payable upon the transfer of property, exemptions may apply for transfers of interests in the matrimonial home between spouses.

Making the correct choice at the time of buying your property will save unnecessary stress and cost to loved ones left behind.  Making the wrong choice could mean that your interest in the property will not form part of your estate and that it will automatically pass to the other co-owner.

Article by Sam Pratt, Cormiston Legal. Reproduced with permission from: