If you’re a homeowner, one of the things you may have found strange in arranging your mortgage for instance, is that at some point you had to decide – when talking about a couple – whether or not to hold the property as” Joint Tenants” or “Tenants in common”. It simply seems really strange that the word “tenant” was used, when you actually become a homeowner. But that just seems to be the way that things are.
We know a lot of people get confused by the use of the word Tenant and the difference between a Joint Tenancy and a Tenancy in common.
Here’s Nick short explanation …
What’s the difference between Joint Tenants and Tenants in common?
Joint Tenant or Tenants in common, are terms you tend to find when you’re buying a property. It’s not necessarily anything to do with the mortgage, so your mortgage broker, or mortgage company, generally won’t have any real deep conversation about it.
But your solicitor is likely to ask: “how do you want to own the property”? Do you want to be Joint Owners, or do you want to be Tenants in common?
Now the thing is, many people will say – particularly if it’s a couple… “Oh we want to be Joint Owners” without actually understanding what it means.
Let’s imagine the case of a husband and wife. A Joint Ownership (actually the legal term is Beneficial Joint Tenancy) means that you each own all of the property.
What that means is: when the first person passes-on, the survivor owns the whole property.
That works automatically. Ownership passes to the survivor, on death.
So the question has to be, “is that good, or is that bad?”
It really depends on the situation.
A Joint Tenancy means that there’s no need for probate, there is no need to do anything really. There may be a need for tax planning, but there’s no need to get probate, to transfer the property to the survivor.
And in most case if the couple were married, as in this example, there is no inheritance tax.
A good way looking at it is to imagine that we’re talking about a joint bank account, You’ve got two signatories on the bank account, “Mr and Mrs” say, and one of the joint-signatories dies. The surviving signatory owns the “value”.
People don’t realize that in many cases Joint property sits outside the estate. So for example, let us imagine that you are a married couple and you have your “joint” children. There are no other children from outside of your relationship. So you might be quite happy that when the first one of you passes, the survivor gets the lot, and of course when the survivor passes on the kids are going to get the lot.
Tenants in common
A Tenancy in common gives you a portion. You could get half each, though it doesn’t have to be half each. So for example, if you are a married couple, you might go for the 50:50.
But if, for example, you had both been married previosuly, and when you got together, one of you put in £100,000, and the other put in £200,000; well now one owns 34%, and the other owns 66%. So the percentages can vary, depending what it is, you’re trying to achieve.
So the difference between Tenants in common and a Beneficial Joint Tenancy (Joint Ownership), is that with Tenants in common, you own your own specific portion.
Now, because you own your own specific portion, you have the right to leave your portion to whomsoever you wish.
Now this has benefit, before the death of a partner too, as well see later
The key here, is understanding the advantages of how you “hold” property, and making sure you buy-it in the best way, as would suit your present and future financial security
Deeper answers are, of course, in the video…