Sever Joint Tenancy to Tenancy in Common
Sever a joint tenancy in favour of tenants in common
In the interest of making a Will, it is important to understand the legal difference between a joint tenancy and a tenancy in common. When you buy a property with someone else, you become either joint tenants or tenants in common and these two states have big implications as to what happens to the property in the event of death.
What is the difference between tenants in common (TIC) and joint tenants?
Simply put, the basic difference between two owners of a property being joint tenants and tenants in common is that the first arrangement does not allow someone to leave their share of the property to someone else when they die, even ‘though their will may stipulate this is to happen; upon death, the other owner of the shares of the property automatically inherits the deceased’s share, whether or not their will states it should go to someone else.
The second arrangement, tenants in common, does allow for someone to leave their share of a property to whomsoever they may wish to. This is why, when you make a will, it is important for you to consider what you want to happen to your shares of the property you may jointly own. So how does it work?
If you buy a house or other property ownership with someone else you are not what the law describes as a sole tenant, and are therefore either a joint tenant or a tenant in common.
It does not matter whether you buy the property with a mortgage or pay cash for it in total straight away. When the legal process of transferring the property to your name and that of the other owner takes place, the conveyancing process will register you and the other owner in the Land.
The Land Registry is the Government department where details of ownership of land and property ownership are recorded.
Joint tenancy is a kind of ownership where two people search for a property, then buy it together, with each person automatically having a 100 per cent share in the value of the property. According to the law, the two owners must act jointly as a single owner.
In most cases, if you jointly own a property with another person and they die, under the survivorship rules, you will have the legal right to the possession of the property. This is the case regardless of the instructions the deceased left in his will or intestacy laws. There is usually no requirement that allows a surviving owner to get a Grant of Letters of Administration or a Grant of Probate to transfer the legal rights to the property possession. They are only required to show the death certificate of the deceased.
However, it’s advisable that you search for an experienced probate solicitor who will advise you or make sure the transfer is registered the right way. You must all agree to put the property on sale. This means that you cannot leave your share of the property to one of your family members or anyone else in a will.
Tenancy In Common
When it comes to TIC, each owner owns a defined stake of the property, which doesn’t have to be equal value. Each owner can decide to mortgage their portion of the property separately. However, if any lenders agree to this, a joint mortgage will still be needed.
Another difference between TIC and joint tenants is that TIC has the legal right to write a will that provides for the gifting of their part of the property to beneficiaries. If the owner of the property passed away writing a will, their stake of the property will be passed on under the intestacy laws. This type of ownership is common among family members and friends who purchase property together.
To achieve a clear understanding when entering TIC, the potential tenants must come into a legal agreement in a document called a Declaration of Trust, which will then be recorded at the Land Registry. Make sure you include the cost of purchase as well as the loading charges.
What can I do if I want to sever being joint tenants and become tenants in common?
In order to sever being joint tenants and become tenants in common, it is best for the owners to contact a solicitor who can carry out the legal process and submit a deed of severance. Your solicitor will then contact the Land Registry and update the tenancy details. This does not change who are the legal owners of the property in order to stipulate who you want to leave your legal share of a property to in your Will. Your lender will need to be approached and from there determine the loading costs.
Both joint tenancies and a tenancy in common may include a joint mortgage. In this case, the lender will often take the view that the highest earner will have the loading percentage and to confirm if this tenant can afford the loading charge, the lender will look at both the amount paid together and individual income. It is important for a lender to calculate the loading charge to determine whether the other party can afford the loading charge or loading fee. A loading charge may be added in order to cover a loan or investment.
In the interest of obtaining the best legal advice on the impact of severing a joint tenancy to being tenants in common, online searches can be useful. Why not google solicitors in your local area to get started and point you in the right direction as to the best way to begin the process.
A quick google can show that for joint tenants, when one person dies, their share of a property automatically passes to the other joint tenants or owners by law. A joint tenancy is the same as being sole owners and in a joint tenancy you have no say in who inherits your portion.
If you are a joint tenant and you die, the other owner will automatically inherit your share of the property, regardless of what any will you have written may say you want to happen to it.
What is meant by Tenants in common
If you and your co-owner are tenants in common, this means that you both own a share of the property; this does not have to be equal shares, however, and could be split between the owners in amounts of for example, 60% and 40% each.
Can tenants in common become joint tenants?
A severance of tenancy needs to be carried out. This is also known as a deed of severance. This is usually completed by a solicitor and does not change who owns the property. The deed of severance is then sent to the Land Registry who record the tenancy in common.
If for some reason your property is not registered with the Land Registry then the Deed of Severance needs to be kept with the deeds to the property, thus ensuring that a proper record is kept of the fact. Your will can then stipulate to whom you want to leave your share upon your death.
What are loading Charges?
Loading charges are often added to a loan or investment. Loading fee is necessary as it can pay for managing the property or covering a higher risk.
Advantages of civil partners or married couples being TIC
There are various reasons why civil partners or married couples chose to own a property as TIC. They include:
- To reduce liability charges of a residential care home.
- To decrease Inheritance Tax liabilities.
To ensure an individual stake of the property will be passed to the children; for instance, when the surviving spouse decided to marry again.
Deed of Trust
Also known as a declaration of trust, a deed of trust includes details such as the amount of money each owner paid as deposit as well as what should happen to the money if the following scenarios.
- You have decided to sell the property.
- One of you is not able to pay their part of the mortgage or the loading charges.
- The relationship breaks down.
A deed of trust can be helpful when you are purchasing a property together with other people as it can protect your financial contributions.
Benefits of Joint Morgages
History shows that people often take out joint mortgages together when they are purchasing property with other people. They are often taken by 2 to 4 people. If there are more 2 people, history reveals that lenders often look at the employment history or history of the income of the 2 highest-earning people to decide how much they will lend or the loading percentage. To determine if you can afford the loading charge, the lenders will look at the amount you are supposed to pay together plus your income. So you can combine your savings together to help you put down a large deposit, which will allow you to a mortgage rate that has a lower interest rate. In turn, this can save you some money in repayments.
If you are in search of advice or reliable support regarding will writing service, mortgage loans or loading charges, please contact us today.
What is the legal difference between being joint tenants and tenants in common?
The difference between them is that the law states for tenants in common you are able to automatically leave your stake of the property to whomever you choose. But this is not the case for the former and it is important to understand this so that you can decide to whom you wish your share of the property to pass to. Tenants in common do not necessarily own an equal share of the property and each tenant in common has the legal right to gift their stake of the property to whoever they decide, usually with the view to leave it to other family or beneficiary.
Married couples may choose to be tenants in common rather than in a joint tenancy to decrease inheritance tax. In a relationship break down, it is a good legal move to ensure their share passes automatically to children if an ex-spouse gets married.