Co-ownership of property is often misunderstood and a frequent cause of disputes. Property lawyer, Terese Kingman, looks at the legal principles governing joint ownership.
Many people own property jointly either with a spouse or a partner. This is often referred to as Co-ownership.
There are two ways of owning property: either as joint tenants or tenants in common. It is important that you discuss both options with your legal advisor when buying a property to avoid any room for dispute in the future.
Joint tenancy is favoured between husbands and wives for a number of reasons, one of which is the Right of Survivorship. On the death of the first joint tenant the survivorship rules allow the property to automatically pass to the survivor. There is no requirement for the surviving spouse to obtain a Grant of Probate in order to transfer the property. The Land Registry will accept notification of the death of the joint tenant by way of death certificate and amend the title to the name of the surviving joint tenant.
While joint tenancy works for many couples, it isn’t right for everyone. In particular it can have sometimes unforeseen consequences for other family members who have an expectation that they will inherit under a will. With a joint tenancy the contents of any will have no effect so far as the property is concerned. So, if you are a joint tenant with X but leave your entire estate to Y in your will, it is X who will receive the property (by survivorship) and not Y.
The second way of owning property is known as tenancy in common and is often preferred when the parties are putting different amounts of capital into the purchase. As a tenant in common you own a separate share of the property, not the whole. For example two people may choose to own a property 50:50 or 60:40, depending on the amount they have each contributed towards the purchase price. It is advisable that you discuss these arrangements with your lawyer, clearly defining the contributions you have both made to the purchase in a formal Declaration of Trust. This document will set out the purchase price of the property, the amount each parties has contributed, the amount of the mortgage (if any) and the division of the equity on a future sale. Although a Declaration of Trust will not protect either party against third party claims it will provide documented evidence of the beneficial interests of each party should there be any dispute in the future.
The topic of co-ownership of property isn’t a simple one since it not only involves land law but encompasses trust law and family law. The House of Lords and Supreme Court have dealt with numerous disputes between parties who cannot agree on whether they own the property equally or in unequal shares. The recent case of Pankhania v Chandegra (2012) confirms that in the event of a dispute a Declaration of Trust will be conclusive evidence. This does not mean that the trust cannot be varied in the future by subsequent agreement between the parties. If it is, then it too should be set out in a formal deed.
Where there is no declaration of trust outlining the interests of each party there will be a presumption that the parties hold the property as joint tenants. However, since the cases of Stack v Dowden (2007) and Jones v Kernott (2011) this area of law still leaves room for doubt and uncertainty. In the earlier case the House of Lords decided that where the parties have bought a property and have not expressly declared how the property is to be held then the court will presume that the parties hold the property as joint tenants. As discussed above if the property is owned as joint tenants the parties will be presumed to own the property as a whole. If either party alleges that the property was intended to be held differently, for example, in equal or unequal shares then they must prove this.
In the latter case the Supreme Court indicated that in cases where it has been established that the parties had intended to hold the property in individual shares, but the size of the shares was in dispute, then the court would have to make the decision for the parties based on what would be fair in the circumstances of the case.
If you have any concerns about co-ownership you must discuss these with your legal advisor at before you purchase to ensure no dispute arises between you and your co-owner(s) in the future. The necessity for the beneficial interests of each owner to be declared in the purchase documentation is more important than ever.
For more details about Co-ownership, joint tenants and tenants in common contact Terese Kingman on 0808 1391606