Joint ownership of property
There are two types of joint ownership of property, beneficial joint tenancy or tenancy in common. It is most important to ensure that you have the right kind of joint ownership.
If you hold property as beneficial joint tenants, it will pass to the survivor automatically on the first death. Neither joint owner can leave his/her share of the property to anyone else by Will or otherwise.
On the first death, there is no need for a Grant of Probate to affect the transfer to the surviving joint owner. Production of a Death Certificate to the Land Registry is all that is needed.
If you hold property as tenants in common this means that you hold the property in declared shares or proportions. In the absence of any evidence to the contrary it will be assumed that tenants in common own the property in equal shares. If property is purchased by two people contributing different amounts of money it is advisable to record this in a separate Declaration of Trust and to agree the proportions due to each party. This can avoid future disputes.
In the event of the death of either of you the survivor does not automatically become the sole owner of the property. The share of the deceased owner passes by Will or intestacy to that person’s heir(s). This may be appropriate where joint owners wish to ensure that their respective shares pass to different beneficiaries, for instance in the case of second marriages, where there are children of each party.
Holding property as tenants in common may also be appropriate where the parties wish to protect a share of the property from potential nursing home fees.
Until recently, if the joint owners were married or civil partners and their joint estates were above the Inheritance Tax threshold, depending on their circumstances, it was often advisable to hold property as tenants in common to achieve Inheritance Tax savings. Since the introduction of a change in the law for deaths on or after 9th October 2007, this may no longer be necessary.
It is very straightforward to change from being beneficial joint tenants to tenants in common. One party serves notice on the other to sever the joint tenancy and henceforth the parties are tenants in common.
It is less straightforward, but possible, to change from tenants in common to beneficial joint tenants.
You can check how you hold your property by looking at your title deeds or, if your property is registered at the Land Registry, by checking the title. In the case of tenants in common, the Land Registry will enter a restriction on the title to prevent disposal by a sole survivor. If it is not clear to you which way hold your property, your legal advisor will be able to tell you.
If you currently hold property is your sole name and are considering transferring it into joint ownership, please remember that this may have Inheritance Tax and Capital Gains Tax consequences unless the parties are married or civil partners.