If you’re buying a home with someone else, your conveyancer will likely ask you how you want to own the home together and give you two options - tenancy in common or joint ownership. Both options are two legal arrangements used to define ownership of a property between multiple people (or sometimes companies), and each has some important differences.
If you’re buying with a partner, the differences are subtle, and you may not ever experience them, but they tend to protect you in those situations you never want to happen but could happen, e.g. a breakup or death.
Here are the key differences between tenancy in common and joint ownership:
Who owns what
In a tenancy in common, each owner has a distinct ownership interest in the property. This means that each owner can own a different percentage of the property and can sell or transfer their ownership interest without the consent of the other owners. Whereas, joint ownership, also known as joint tenancy, means that each owner has an equal and undivided interest in the property. This means each owner has ownership of 100% of the property.
What happens when someone passes
One of the most significant differences between the two arrangements is the right of survivorship i.e. who gets what when someone passes away. In joint ownership, if one owner passes away, their ownership of the property automatically gets given to the surviving owners, and the deceased owner's heirs (or those in their will) have no claim to the property. In a tenancy in common, however, each owner's ownership interest is separate, and if one owner passes away, their ownership interest passes to their heirs (or whoever they’ve given it to in their will).
Who is in control
With tenancy in common, each owner has the right to possess and use the entire property, subject to the rights of the other owners. Each owner can also make decisions about their portion of the property, such as leasing or selling it. In joint ownership, each owner has an equal right to possess and use the entire property, and decisions about the property must be made jointly by all owners.
How they're set up
Both arrangements will be set up by your conveyancer as part of your legal process. To buy a home as tenants in common, your conveyancer will put together something called a Declaration of Trust (also known as a deed of trust). It's a document that'll include how much each owner paid towards the deposit and what should happen if:
- The relationship between you and the other owners breaks down
- One owner is unable to make their mortgage repayments
- One owner wants to sell the property
The declaration of trust for property is usually agreed on the purchase date. That way if circumstances change, it’s clear who’s entitled to what and you’re able to protect the money you’ve invested in the property.