Should you buy a property as joint tenants or tenants in common with?
If you're buying a property with a partner or friend, the solicitors may have asked if you'd like to purchase as tenants in common or as joint tenants.
As you're buying the property jointly, you would say joint tenants, right? But that might not be the best option for you. Find out why in this article.
If you're buying a property with a partner or friend, the solicitors may have asked if you'd like to purchase as tenants in common or as joint tenants.
As you're buying the property jointly, you would say joint tenants, right? But that might not be the best option for you. Find out why in this article.
What does each of these terms mean? You need to understand so that you can make an informed decision. Of course, we are not your legal representatives, so you are always advised to seek further independent legal advice before making any final decisions.
This decision aims to establish what will happen with the property if one party dies. Does that person's share go to the other property owner or their estate? This is important if the parties that purchase together are not a couple but perhaps friends sharing. As a couple, you could assume that the other owner would inherit your share as they are most likely your next of kin and a beneficiary of your estate anyway. But, if you are buying with a friend, you might want to leave your share to a family member in your will.
Of course, if the parties were to marry in the future and then leave their respective shares to each other in the will, all is fine. What if you wanted to leave your share to a sibling, parent, or perhaps even a charity?
It seems like an unlikely issue to arise, and one that may be light years away, but if you chose the wrong option at the outset, there could be more considerable repercussions in the future.
So, what does the term tenants in common mean?
Each party owns a specific share of the property. This doesn't have to be an equal share, so it could be beneficial if each party pays different amounts towards the property purchase. There are potential disadvantages, such as if a co-owner dies without a will, the property must go through the probate process, which can be costly and usually takes a long time, so your beneficiary may not receive the inheritance as quickly. Also, the surviving party would now own a share of a property with an entirely different person - perhaps their friend's parent. This could get complicated, particularly if the deceased's parent wants to sell their share of the property, leaving the surviving owner in a sticky situation.
And what does 'joint tenants' mean?
Buying with a partner usually means that the joint tenancy option is the best for you. This option will ensure that if one party dies, their property ownership automatically passes to the other party. Known as a right to survivorship, avoiding any need for probate.
Owning a property as a joint tenancy does have some disadvantages, though. Since every owner has an equal asset share, any decision must be mutual. You might not be able to sell or mortgage a home if your co-owner doesn't agree.
You must understand what each term means and seek professional legal advice to help you to decide which option is best for you.
As you can see, it is a crucial decision to get right if for no other reason than if the worst should happen to one of you, the other could be left with a significant issue to resolve. Not a pleasant thought, but a very real one that should be ironed out when purchasing the property and not when it's too late.
If you have questions about buying a property, get in touch with our team of experts today.