The ownership structure you use when co-buying a property can have a big impact when you sell your property.
Choosing between a tenants in common vs joint tenants ownership arrangement won't matter as much while you co-own the property together, but if you go your separate ways as individuals or wish to sell the home, the ownership structure you chose at the beginning can make all the difference.
Here's how to decide the best structure for you.
As joint tenants, you co-own the property as a couple or even as a group. The property is considered to be owned in equal shares (i.e. 2 owners each own 50%; 3 owners each own 33.33%; 4 owners each own 25%, etc).
In the event that one party dies, a "right of survivorship" exists. This means the full ownership of the property automatically transfers to the surviving tenant/s.
When deciding whether to buy as tenants in common vs joint tenants, it's important to consider that as joint tenants, this transfer of ownership happens regardless of what you write in your will. Michaela Schmidt from JMA Legal confirms that a joint tenant cannot leave their share of the property to anyone else in their will since a will does not override a joint tenancy.
In the event of a relationship breakdown, a joint tenancy can be ended by one partner buying out the other partner's share before transferring full ownership to the purchasing partner.
Tenants in common can own unequal shares of a property. This type of tenancy agreement is often used by people who have already contributed towards the ownership of a property before adding another person to the title.
For instance, one person who previously contributed the deposit and has owned the property for 10 years could own 80%, and the incoming property owner starts contributing to property costs today and owns 20%.
Alternatively, if 2 people buy a property together and buyer 1 takes on two-thirds of the mortgage and pays two-thirds of the deposit, they own two-thirds of the property. Buyer 2 pays one-third of the deposit and takes out a mortgage for one-third of the loan, so they own a one-third share.
Tenants in common ownership offers more flexibility when structuring ownership portions.
Also with tenancy in common, there is no right of survivorship. Upon death, the deceased's share of the property is transferred to their estate and will be distributed according to their will. This can create problems for the surviving property owner, as part of their property is now legally owned by a completely new party.
The structure that best suits you when deciding on tenants in common vs joint tenants will depend upon your individual circumstances.
If you want the assurance that, in the event of the death of 1 partner, ownership of the property will pass to the surviving partner, a joint tenant agreement is best. It can be most suitable for married couples, who want peace of mind that their home will be safe and protected if one of them dies.
However, if you already own a property and are thinking of adding your partner to the title, you might want to consider a tenants in common agreement to reflect the equity you've already built up.
For instance, if you have already owned a home for several years and your partner moves in with you, you might agree to an 80/20 split if they begin contributing to mortgage repayments and they give you a lump sum of cash.
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