Many people don’t realise that when it comes to purchasing a property with another person you can do so in two distinct ways; as joint tenants or as tenants in common. This is a legal distinction that completely changes your rights in relation to the property depending on which method you choose.
So what is the difference between joint tenants and tenants in common?
Joint Tenants:
The concept of joint tenants is that each owner of the property holds the exact same (and equal) interest in the property as each of the other owners. The parties are grouped together as a single owner of the property and are therefore all equally responsible for the costs associated with owning and maintaining the property, as well as an equal share of the profits from the renting out, or sale of the property.
Purchasing a property as joint tenants is the method most commonly used by couples, in most part due to the rule of survivorship. The rule of survivorship means that as each owner jointly owns the property as a whole, when an owner dies their share is automatically distributed to the surviving owners, with no stamp duty being payable on the transfer. Their share of the property does also not form part of their estate and is also generally outside the scope of a family provision application.
So the basic principle of purchasing property is that each party to the purchase owns the property jointly and wholly.
Tenants in Common:
The concept of tenants in common is that each owner has a separate and distinct interest in the property being purchased, and each owners interest can be for a different amount. For example one party may own 60% of the property and the other 40%, or there may be three owners, with each owing a third share in the property.
Purchasing a property as tenants in common is the method most commonly used by friends, siblings, or relatives pooling their resources to buy a property. The rule of survivorship does not apply to a property held as tenants in common and each owner is free to nominate whom their share of the property will be transferred to in their will.
As each owner holds a separate and distinct share in the property they are also free to dispose of it as they wish, including selling their share to one of the other owners, or another party.
Where the property is rented out, or sold, each owner is entitled to a share of the profits equal to the share of the property they own.