Tenants In Common: What You Need To Know Before Buying
Buying a property is a big step – even more so when doing it with someone else.
This generation of 20 and 30-somethings are struggling to get on the property ladder.
The other individual would traditionally have been a romantic partner, but almost half of first-time buyers are now open to purchasing a home with a friend or sibling to make it more affordable.
If this sounds like you, it’s crucial to understand the legalities of joint ownership. In the UK, you have two main options: ‘Joint Tenants’ or ‘Tenants in Common’.
While Joint Tenancy means you both own the whole property equally (50/50), Tenants in Common is when a share of a property can be unequal between the people who bought it.
For example, if you and your partner are buying a property, you might decide to split ownership 70:30, reflecting how much each person is contributing to the deposit or mortgage payments. These shares can be formally recorded in a document called a Declaration of Trust.
Advantages of buying as Tenants in Common
One of the biggest advantages of being tenants in common is the freedom and flexibility it gives you.
1. Flexible ownership shares
Each owner’s share can be tailored to their financial contribution or agreement. This is particularly useful if one party is contributing a larger deposit.
2. Passing on your share
Another key benefit is that you can leave your share to whoever you choose in your will. It won’t automatically pass to the other owner if you die. This is particularly relevant for unmarried couples, siblings, or friends buying together, where you might want to ensure your share goes to your children or other family members.
For buyers who want to ensure their share of the property goes to specific beneficiaries (e.g., children from a previous relationship), Tenants in Common provides that flexibility.
3. Independence in decision-making
Each owner has the freedom to manage their share independently, including selling or transferring their share (subject to certain conditions).
If you’re buying with a partner, it’s worth discussing this with family law solicitors to understand how this interacts with any existing wills or inheritance plans.
4. Suitable for multiple owners/ investment
This arrangement is often used by groups of people, such as friends or siblings, who are buying property together.
If a group of investors is purchasing a property together, Tenants in Common allows them to divide ownership and responsibilities clearly.
Potential drawbacks and considerations
If you and the other owner disagree about selling, it can become complicated – you might need to seek legal advice or even apply to the court for an order to force a sale.
Communication is key. Make sure you discuss your intentions and expectations upfront. It’s a good idea to have a written agreement that outlines how you’ll handle decisions about the property, such as maintenance, repairs, and potential sale.
It’s essential to have a legal document called a ‘Deed of Trust’. This document sets out your respective shares and any agreements you’ve made about managing and selling the home. A solicitor can help you draw this up and make it accurately reflect your wishes.
Steps to protect your interests as Tenants in Common
To ensure your interests are protected, take the following steps:
1. Have open and honest conversations with the other owner(s) from the start. Discuss your individual goals, financial contributions and what you want to happen to the property in the future.
2. Instruct a solicitor to draw up a comprehensive Deed of Trust. This document will act as a safeguard and help prevent disputes later on.
3. Keep detailed records of your financial contributions. This includes the deposit, mortgage repayments, and any other expenses related to the property.
4. Make a will that clearly states who you want to inherit your portion of the property. This will mean your wishes are respected after you’re gone.
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