Property Ownership: How Do You Own Your Property?

Property ownership

The way in which jointly held property is owned has tax implications. It will also determine what happens when one of the co-owners passes away.

Joint tenants

Where a property is owned as joint tenants, the owners together own all the property equally; together they own the whole rather than each owning a specified share. All joint owners will have their names on the deeds, but if one of the co-owners dies ownership passes to the other joint owners. The deeds are changed to the names of the surviving co-owner or owners once a death certificate has been provided to the Land Registry.

Spouses and civil partners generally opt to own property together as joint tenants to ensure that it passes to the surviving spouse or civil partner on death, particularly where the property in question is the main residence, to provide security to the surviving spouse or partner that they will not need to leave their home following their partner’s death.

However, from a tax perspective, this is not always the best option, particularly in relation to an investment property where this is let out to provide an income.

Tenants-in-common

The other option for owning property jointly is as tenants-in-common. Where this route is taken, each joint owner owns a specified share of the property. That share is theirs to do with what they choose. On death, their share is distributed in accordance with their will – it does not pass automatically to the other joint owners.

Prior to the introduction of the Inheritance Tax (IHT) transferable nil-rate band in October 2007, property was often owned as tenants-in-common to prevent the nil-rate band from being wasted on the death of the first spouse or civil partner by passing the deceased’s share to the children rather than the surviving spouse.

Ownership as tenants-in-common is popular where the joint owners are not in a relationship, such as if a group of friends buy a property together. However, it can also be beneficial for married couples and civil partners to own property as tenants-in-common rather than as joint tenants, as it allows for an element of flexibility when tax planning which is not available where a property is owned as joint tenants.

Where property is owned as tenants-in-common and the ownership shares are not specified, the owners are deemed to own the property in equal shares. Therefore, where spouses or civil partners own a property jointly as tenants-in-common, unless otherwise agreed, each will own a 50% share.

Get in touch

For more information or advice on property ownership, contact your local Whitings LLP office.

Disclaimer - All information in this post was correct at time of writing.