With recent news articles from mortgage lenders citing an increase in investors pooling funds and buying property with family members and friends, it is very important that you understand what the different ownership models are and it is really something that you need to seek legal advice on.
Tenants in Common
Where two or more people hold land as ‘tenants in common’, each is regarded as owning a discrete interest in that land. Tenants in common are said to have an undivided share and may generally deal with that share as they wish. For example, they may sell the share or dispose of it in some other way, such as in their will. Shares held by tenants in common need not be equal; for instance, one tenant may have a three quarter interest and the other a quarter interest. Also, there may be more than two people as tenants in common.
It is advisable that people holding land as tenants in common enter into an agreement that sets out their obligations for managing the property and restricts the individual rights of disposal of individual shares without firstly giving the other shareholders the opportunity to acquire their interest. Failure to do this could result in a third party acquiring their interest, which could severely disadvantage the other shareholders.
Joint Tenancy
Joint tenants do not have proportionate shares in the property, as do tenants in common. A good example of property owned under joint tenancy is a home purchased by a husband and wife. Each joint tenant has a right shared with others to the whole of the property but no individual right to an undivided share of the property. In practical terms this means that if one of the joint tenants predeceases the other (dies), then title to the property is automatically vested in the other. This is called the right of survivorship.
The detail and major difference between the two is what happens upon the death of an owner – does it automatically revert whole ownership to the other owner (that’s Joint Tenancy) or is that ownership dealt with through a will (and that’s Tenants in Common).
There are numerous areas that pose potential difficulties for co-owners, particularly in the areas of wills and divorce. While the question of ownership is not raised every day, it is important that you can differentiate between the two forms of co-ownership.
