When buying a property you will be asked if you would like to hold the property as Joint Tenants or Tenants in Common.  Before deciding which method will suit your circumstances best, it is vital to fully understand the differences between the two.

Joint Tenants

The whole of the equity in the property is held jointly between the owners.  Should one of the owners pass away, their interest automatically passes to the surviving owner.  If one owner goes into residential care and there are no cash assets with which to pay for care, the council can claim against the whole of the equity.

Tenants in Common

The equity in the property is held by the owners as individual share, be that equal or unequal.  Should one of the owners pass away, their interest passes in accordance with their Will or under intestacy rules.  If one owner goes into residential care and there are no cash assets with which to pay of the case, the council can only claim against that owner’s share of the equity.

Holding a property as Tenants in Common is essential if you do not want your co-owner to inherit your interest in a property.  This is particularly useful for unmarried couples, married couples who have children from a previous relationship and is the most appropriate method when property is owned by a partnership.

Unequal Shares and Declarations of Equity

If you are buying a property with someone else, one of you may have a larger deposit than the other. It is also becoming very common for family members to assist their children with house deposits.  In these circumstances, it is not unusual for the parties to record their unequal shares either in the transfer deed or in a declaration of equity.

A declaration of equity (also known as a declaration of trust) is a legal document executed as a deed that we can draw up which describes how much each party has contributed to the purchase and how the net proceeds will be divided upon the sale of the property.  You can even include provision stating that you hold your interest in the property for the benefit of somebody else.

A declaration of equity can be drafted to suit your particular circumstances. For example, it could indicate that a fixed sum is to be repaid to one party with the balance being shared equally or it could state the percentage contributions of each party.  If your individual shares in the property change at any time, this must be recorded in a new declaration of equity, otherwise the terms of the original declaration of equity will prevail.

No matter how you hold the equity in your property, you must ensure that you have an up-to-date corresponding Will.  A provision in a Will stating that your interest in a property is to pass to your children is meaningless if you own it as joint tenants with your spouse.  Equally, a provision in a Will stating that your interest in a property is to pass to your co-owner is meaningless if you have already entered into a declaration of equity stating that you hold your share of the equity for the benefit of somebody else.

The important thing to remember when deciding how to hold the equity in a property, is to provide your solicitor with full details of your circumstances so that they can provide you with the best advice possible as to which method is most suitable for you.

To speak to an experienced property solicitor, please get in touch with the team at Farleys Solicitors who will be happy to help. Call 0845 287 0939 or submit your enquiry online.