Joint Ownership, Severance & Right to Occupy

 

In England and Wales, there are two ways in which a person can own land and property, legally and beneficially.

 

Legal ownership refers to the registered owner, so their name is either on the property register at HM Land Registry or on the Title Deeds, if the property is not registered. Beneficial ownership refers to who enjoys the benefit and control of the property. Even if someone is not named as the legal owner, they may have the beneficial interest due to an agreement, trust or financial arrangement.

 

Individuals can co-own property in two main ways: “Joint Tenants” or “Tenants in Common”.  The use of the word ‘tenant’ here is not to be confused with a tenant who rents a property.

 

Generally, people tend to own their homes as joint tenants.  However where there are specific factors involved, such as children from a previous marriage, joint ventures for business purposes and/or tax considerations, people may choose to own as tenants in common.

 

The distinction between the two is important to understand as where property is owned as joint tenants and one owner dies, the deceased’s legal and beneficial interest in the property passes automatically to the surviving owner. This is called the “Right of Survivorship”.  Where property is owned as tenants in common and one owner dies, the deceased’s legal interest passes to the surviving owner but their beneficial interest passes in accordance with their Will or, if there is no Will, the intestacy rules.

 

The nature of a beneficial interest can change during ownership.  For example, a joint tenant can sever their interest (convert it into a tenancy in common). After severance, each owner will become tenants in common, holding a distinct share, and the right of survivorship no longer applies.

 

It is becoming increasingly common for couples to own their property as tenants in common, so they can leave their interest in the property to their children (or other descendant’s) subject to the co-owner having the right to continue living in the property.

 

Example:

 

Husband and Wife own a property as tenants in common in equal shares (50/50). Husband dies and in his Will he has gifted his 50% share in the property to his children subject to his Wife having the right to continue living at the property for the remainder of her days. In this scenario the Husband has provided security for his Wife but at the same time preserved assets for his children.  Had Husband and Wife owned as joint tenants and the Husband had died, his share of the property would have automatically passed to his Wife.  If his Wife were to remarry, there is a risk that the property could bypass the children and be inherited by the new spouse.

 

Whether you are considering purchasing a new property or reviewing your current arrangements you should take legal advice on the best form of ownership for you. At the same time, you should also review your Will, or make a Will if you have not already done so, to ensure that your interest in the property passes in accordance with your wishes but at the same time affords the co-owner security.

 

Our experienced team can assist you in reviewing your estate, identifying any issues that need to be addressed and can provide you with tailored advice, guidance and support in order to safeguard your interests and implement asset protection strategies.

 

Article by Kimberly Matthews, Solicitor, Lifetime Planning Team