Joint tenants or tenants in common? What's the difference and what does it mean for you? We reveal all...
Buying a house isn’t cheap. Every corner you turn there seems to be another cost, creating a never-ending bill.
You have to buy the house, pay stamp duty, moving costs, legal fees, deposit, surveyor’s costs, the list is endless. If there’s a way of splitting costs with someone and making this cheaper, you’re going to take it, right?
Well, good news! If you’re wanting to buy a property with someone else, there’s a way of making this more affordable…
Joint tenancy or tenants in common
This may be something you’ve never heard of, something completely new to you and that’s no problem! We’re here to help. We’ll go over the basics, help you decide which may be right for you.
We’re also going to give you your options if you’re in joint tenancy or tenants in common and you want to know the way out!
If you want to get a specific answer, this menu will help you. If this is something completely brand new, then sit back and take it all in…
- What does joint tenancy mean?
- What does tenancy in common mean?
- Advantages and disadvantages of joint tenancy
- Advantages and disadvantages of tenants in common
- Should we be joint tenants or tenants in common?
- Is it easy to change from joint tenants to tenants in common? How can I escape them?
Struggling with joint tenancy or tenants in common?
Joint tenancy means each person has equal rights to the whole property. Even if one party contributes more to the finances, the rights are still split 50:50 and any money made on the property will also be equally split.
When buying a property under joint tenancy, a single tenancy agreement will be signed by all parties with the landlord before the sale can be completed.
In joint tenancy, all parties have joint responsibility meaning all must pay for arrears, damage to the property and share of the tenancy deposit. When selling a house under joint tenancy, all parties must agree to a sale for the property to be sold.
Little tip - to make it easier for yourself further down the line, it’s a good idea to discuss plans on what will happen if someone wants to leave, so no one is stuck unhappy in the tenancy agreement.
In your joint tenancy agreement, there may be a ‘break clause’, which is an agreement that you can give notice if you need to move out early. Break clauses can be described as a sort of ‘safety net’, just in case things are not to work out. All joint tenants have to agree to a break clause for it to be included in the contract.
Tenants in common means that each party owns a specific share of the property and this doesn’t have to be an equal split. For example, one party could own 70% of the property and the other party own 30%.
If you’ve bought a house as tenants in common, then it may be a good idea to have a ‘Trust Deed’ or ‘Declaration of Trust’ drawn up. This is a legal document which does two things – details the percentage share of equity owned by each party and it can also detail a method where one party can buy the other party out.
Something to bear in mind when considering joint tenancy and tenants in common is this key difference between the two. If one of the parties was to pass away, in joint tenancy the other party will have ‘rights to survivorship’. This means exactly what you may think – if you ‘outlive’ the other party, their share of the property will automatically be transferred to you!
As tenants in common, however, the party who passes away will be able to detail in their will what they wish to happen with their share. For example, it may be passed down to children or grandchildren.
Just like anything, there’s both advantages and disadvantages of joint tenancy, which need to be considered when deciding which arrangement best suits you. Here we've got a list to help you in this decision...
- Rights to survivorship - in joint tenancy, you have the right to the proportionate share of the other party should they pass away
- Avoid probate - in joint tenancy, because of rights to survivorship, obtaining the rights to the share of the deceased party, the living tenant only has to show the death certificate, meaning a long probate process is avoided
- Rights to rent and profit - in joint tenancy, should both parties choose to rent out the property, both tenants are entitled to an equal proportion of the rent paid. Also, if there are profits which could be made off the land, then all joint tenants are entitled to an equal share of the profits
- More simple process - in joint tenancy there’s no need for a document defining the relationship between tenants, as it’s fairly simple, as everyone has equal rights. This reduces the amount of work involved in the transaction, making it a more straightforward process (yay)
- More responsibility - compared to tenants in common, joint tenancy means more responsibility for each party. This is because, in joint tenancy, each party has an equal share of the property, which comes along with equal responsibility. Each party must pay an equal proportion of taxes, mortgage payments, etc
- Lack of inheritance rights - as we mentioned earlier, in joint tenancy the rights to survivorship mean the death of one party results in their share automatically being transferred to the other tenant. This means, compared to tenants in common, those in joint tenancy don’t have any rights to dictate what happens to their share, should they pass away
- Maintenance and repairs - in joint tenancy, each tenant has to pay their proportionate share towards the costs of repair and maintenance of the property. Without everyone paying their share, repairs will not be sorted. You may be reading this and thinking ‘but I think this is a good thing? It’s fairer as everyone pays an equal amount.’ A very valid point and to be honest, what’s good and bad is a lot down to opinion, so if this adds another positive to joint tenancy for you, then great!
- One debt can mean a forced sale - in joint tenancy, if one of the tenants has an outstanding debt the other tenant will be asked to cover this debt. If, however, the other tenant can't afford to cover the debt, the tenants will be forced to sell the property. We know this really isn't ideal, so make sure you're choosing the other tenant wisely...
Want an escape from joint tenancy or tenants in common?
- More inheritance rights - in tenants in common, each party can state in their will what they wish to happen to their share, should they pass away. This means they can leave it to children or partners, instead of it automatically going to the other tenant, like in joint tenancy
- Add tenants at any time - in tenants in common, you have the ability to add tenants at any point over the period of ownership. This differs to joint tenancy, where all tenants have to be written into the title at the same time
- Smaller share doesn't mean less rights - in tenants in common, you may only have a 20% share in the property, but you still have rights to the whole property. Basically, a smaller share doesn’t equal less rights!
- Help save on inheritance tax - in tenants in common, when the last tenant dies, the inheritors will have to pay inheritance tax. However, as inheritance tax is judged on the market value of the asset and the asset is only a share of the property, the tax will be less. This sounds a little confusing, so here’s a little example to help -> if the property is worth £600,000 and the last tenant who passes away owned a 40% share, those who are inheriting the property will only have to pay inheritance tax on the 40% share, saving them a whole lot of money (phew).
Also, in case you didn’t know, generally you don’t have to pay inheritance tax on the value of estate below £325,000 threshold
- No control over sale - in tenants in common, if one party decides to sell their share, the other party has no say in who the share is sold to. This may result in a tenant finding themselves sharing ownership of the property with a total stranger
- Both parties required for sale - in order to sell a property in a tenants in common agreement, both parties need to agree to a sale
- More complex - tenants in common is a slightly more complex arrangement than joint tenancy. For example, if one of the tenants was to go into care, the local authority can take control of their share of the property. This may ‘block’ the second person from being able to move or sell, as in order to sell the property the local authority would also have to agree
There’s no straightforward answer to this as it will depend on each situation. BUT, we're going to help you and give you the information you need so you're able to make your own decision...
Joint tenancy is normally more popular amongst those who are purchasing with a relative or with a partner. This is because each party owns the property equally and contributes to the property bills equally. Another bonus of joint tenancy is the lower legal fees, due to the process being less complex and fewer documents required (wooo).
Tenants in common may be a better option if you’re buying a property with someone you don’t have a relationship with or it’s for investment purposes. Tenants in common may be better in these situations as it’s possible for each tenant to own a different proportion of shares, but still means everyone has rights to the whole property.
The right of survivorship is a key difference between joint tenancy and tenants in common. In joint tenancy, if one of the owners was to die, the property would automatically be passed onto the surviving person. In tenants in common, if an owner was to die, their share of the property would move to their estate and will be transferred to whoever is outlined in the deceased’s will.
Joint tenancy has certain rules of sale and therefore requires all parties to agree and sign the transfer. Whereas in tenants in common, there’s no rules on selling and any owner of shares can sell their share to whoever they choose, and don’t need permission from any other parties.
Also, in tenants in common, if one party wants to sell then the property will be sold, whereas in joint tenancy a sale can’t be forced in the same way. To force a sale, it will have to be taken to court, which means a long process just to be able to sell the property!
BUT, there is a way to avoid this. We mentioned earlier about putting a break clause in your agreement to act as a ‘safety net’ and this is exactly why. If you have a break clause, which details circumstances by which either party can agree to sell, then this stops the potentially long and expensive court case to force a sale in a joint tenancy agreement.
Want to use your break clause and sell the property?
Should you want to, you can change from joint tenancy to tenants in common or vice versa. However, this isn’t to say the process is quick and easy…
To change from joint tenancy to tenants in common, a notice of severance must be agreed and signed by all parties. The agreement must also be registered with the correct land registry office and all mortgage lenders must be notified.
The transaction should have minimal cost and you can also apply to undergo the transaction without permission from other parties. The process will be different depending on whether other owners agree or not and you can read more about the process here.
To change from tenants in common to joint tenancy, you will need agreement from all owners before applying for this process. This process is liekly to have a higher cost, as you will need to enlist the help of a lawyer. . To read more about the process of changing from tenants in common to joint tenancy, have a read of this.
How to escape joint tenancy or tenants in common
If you and the other parties are disagreeing on what to do with the property and feel you’re at a dead end, the best escape route may be selling the property. Selling is a great option, as it allows you both to split the equity and move on.
If you’re selling a property as joint tenants, the money will be split equally. If you’re selling a property as tenants in common, the money will be split in accordance with the share owned.
We’ve got a list of the MANY options available when it comes to selling a house AND we’ve also looked at ways to get you a quick house sale, as we know how difficult it can be when there’s ongoing disagreement over a property and you just want to get it sold!
Estate Agent - When you think of selling a property, the first method which probably comes to mind is through the ‘typical’ route of enlisting the help of an estate agent. This route will entail an estate agent viewing and giving your property a valuation. This valuation, should you be in agreement, will then be the ‘asking price’ the house is advertised at on the open market. Once the property is advertised, interested parties will then arrange viewings and, should they be interested, will place an offer.
Offers placed have no guarantee of being at the asking price of the house and are likely to be subject to survey, meaning a buyer may choose to reduce their offer, or even withdraw their offer completely, after a survey has taken place.
The average time for a house sale is about 18 weeks (The Advisory) and so if you’re looking to quickly get out of your joint tenancy or tenants in common agreement, then selling through the open market most likely won’t get you a quick house sale.
Also, if you’re finding it hard to agree with the other tenants, arranging multiple house viewings won’t be easy and may make selling through the open market a less desirable route.
Auction - If you’re wanting a fast house sale, an auction could be something worth considering. At auction you will get serious buyers who will likely have their finances in place, as when the hammer goes down on a deal, contracts are exchanged, and a 10% deposit is put down. The buyer then has 20 to 28 days to complete, helping you sell your house quickly.
At auction, you’re also less likely to get time wasters, with everyone there serious about buying. You’re also unlikely to get ‘gazundered’, which is where a buyer suddenly drops their price after it has been agreed. There’s also demand from multiple buyers at auction, which may help drive up the price.
However, even at auction, buyers can and do pull out of the sale, forfeiting their deposit. Also, at auction, you will have to have several open days to allow potential buyers the opportunity to properly look at the property. If you’re finding it hard to agree in your joint tenancy or tenants in common, then arranging open days may be difficult to sort out.
Also, at auction, you have to cover your own legal fees and you have to pay a commission of the sold price to the auctioneer and pay for advertising and marketing costs, as well as room hire. The price your house sells at, at auction, can also be significantly below the ‘market price’. The buying of your property will also be subject to a survey.
There are no gurantees at auction that your property will sell and can take 6-10 weeks, meaning it's not the quick house sale you may be hoping for.
If you're wanting to know more about selling a house at auction, then click here.
Part Exchange - A part exchange scheme is where you trade the value of your current house against a new build property, with your property acting as a ‘part payment’ for a new build. A part exchange scheme can be generally good for a quick house sale, as it means a guaranteed sale of your property and no chain.
However, it is a sale method which won’t be helpful to all in joint tenancy or tenants in common. For those who are selling because of disagreements and just want to sell and be rid of the property and the joint tenancy or tenants in common, this won't work for you, as you're given a new property, meaning you won't have 'cut ties' with the other tenants.
If you want to find out more about Part Exchange, then read this.
Quick House Sale Company - Another option to help you escape your joint tenancy or tenants in common is to sell to a ‘quick house sale company’. As the name suggests, they specialise in helping you sell your house quickly.
Quick House Sale companies will give you a cash offer for your property, which is a guaranteed price and therefore means you have a guaranteed buyer. Your legal fees will be covered by the company and you don’t have to pay any commissions or fees. You also won’t get ‘gazundered’, as the price you’re offered by the company is a guaranteed price.
Not only do you get cash in your bank, you can also get it in your bank quickly! Some quick house sale companies can have the property sold and cash in your bank in as little as 7 days.
Unlike on the open market and at auction, selling with a quick house sale company only involves one quick house viewing, to help ensure that the valuation and offer for your property is as accurate as possible.
Also, unlike at auction and on the open market, quick house sale companies are focused on your property and getting a deal done with you. This means quick house sale companies will buy any property, giving you a price slightly below market value, but will buy it FAST!
If this option sounds like something you may be interested in, you’re probably thinking ‘where can I find a quick house sale company?’
Here at The Property Buying Company, we’re a cash buyer of houses, buying any property in any condition, in as little as 7 days, all whilst covering your legal fees!
Our offer isn’t subject to a survey, so don’t worry if your house isn’t in ‘tip top’ condition. We only require one quick viewing to make sure our offer is accurate, which we can arrange this for a date and time to suit you and the other tenants.
Our offer may be slightly below market value, but our average completion time is 2-3 weeks, meaning you can quickly sell your property and stop disagreements with the other tenants. Our offer is a cash offer, meaning the price we quote is the price you’ll be paid!
We have over 50 years’ combined experience in the industry and countless good reviews on trust pilot (feel free to check them out), meaning we really are a quick house sale company you can trust.
Why not get you on your way to selling your joint tenancy or tenants in common property FAST by giving us a call or completing our online form to get a no-obligation cash offer, which we could have in your bank in as little as 7 days!
Ready to stop the disagreements and go your separate ways?