Buying a property of any kind is a fine achievement in itself. You can purchase a property in a number of ownership types, including individuals, companies, and trusts. In this market insight, we explore the difference between joint ownership and tenants in common.
The most common way to buy a property is with two people. These two people are often spouses. Having two people collectively can make it easier to borrow money and buy. These types of buyers usually purchase as joint owners. It is not uncommon to see family and friends combined resources to buy a property. In these cases, they often look at purchasing in tenants in common.
What is the difference between joint ownership and tenants in common?
Joint ownership
A joint ownership is a group of people sharing ownership and the mortgage. This means they own the property in equal share (50% each) with the mortgage also being the same. Essentially each person has a one hundred percent stake. The most common joint owners are married couples or spouses.
Joint ownership has some distinct terms and conditions:
- In the event one joint owner dies, their share of the property would become the new ownership of the surviving joint owner.
- An established Will (estate plan) will not allow you to allocate your share to a nominated beneficiary.
- Both joint owners need to agree on selling the property before it can go on the market.
- A married couple that owns a property together are considered as joint tenants.
Tenants in Common
Tenants in common allows each person to also have a shared ownership, however it does not need to be equal share. For example, two owners can choose to have a 50% share, but they can also change that split to a 80%/20% or they may have four people accepting an even 25% stake. The m ost common tenant in common may be business partners or siblings buying together.
Tenants in common ownership has some distinct terms and conditions:
- In the event one of the owners dies, they are entitled to give their share of the property to whoever they choose. This is managed through their Will or estate. This means the other surviving owners are not automatically entitled to the deceased share.
- You can have more than two people take a tenants in common ownership. For example, four siblings could purchase a property together.
- All owners of the property need to agree on selling the property before it can go on the market. This may be more difficult if owners are experiencing different financial circumstances or life stages.
Joint ownership and tenants in common – which is best?
All financial decisions provide advantages and disadvantages. Both ownership types have specific characteristics to serve different purposes. Given the fact both joint ownership and tenants in common have legal obligations and requirements we strongly recommend consulting a lawyer or solicitor. They will take into account your situation and provide qualified legal advice to further help you understand the difference between joint ownership and tenants in common.
If you’re interested in buying an property we welcome the opportunity to help. You can contact us at anytime to discuss your circumstances.
While we have taken care to ensure the information above is true and correct at the time of publication, changes in circumstances and legislation after the displayed date may impact the accuracy of this article. If you want to learn more, please contact us. We welcome the opportunity to assist you.
November 2020
