Questions over who owns the home

Mortgage Introducer

September 20, 2016

row of houses1

Seventeen million (34%) of adults in the UK own a home with another person but one in four of those are not aware of the legal structure to how they own their home, research from Ocean Finance reveals.

Some 63% of homeowners in the UK know they are joint tenants and 12% of homeowners in the UK know they are tenants in common but a quarter of UK adults don’t know the legal terms in which they own their home.

When a property is purchased jointly the owners can chose to either be joint tenants or tenants in common. This confirms the type of legal ownership each person has over the property, which in turn can affect what happens to the property if the relationship breaks down, or if one owner dies.

The most common type of joint home ownership in the UK is joint tenants, with 63% of homeowners believing they hold their property as joint tenants. This gives equal rights over the property for each partner and equal ownership with each owning 100% of the property. As a result, for joint tenants the ownership of property passes automatically to the other owner when one dies. The share of the property can’t be passed onto a third party in a will whilst the other owner is alive.

By contrast, only 12% of UK homeowners say that they own their home as tenants in common. With tenants in common each owner owns a fixed stake in the property – which could be 50/50, but doesn’t need to be. This is often seen in cases where one partner puts down a larger deposit when purchasing a home, making it possible for two people to jointly own a home together, with one person owning say 70% and the other owning 30% of the property, for example. This is also frequently seen when the parents of one or both partners assist with their child’s deposit as the percentage share of the property is agreed upon in advance, usually from the size of the deposit each side puts down, this secures the money from the parents to their child.

Being tenants in common can also be useful if the relationship breaks down between the two homeowners. The financial split may be easier to resolve because the share of property ownership has already been agreed upon, even if the property has increased in value.

Another important fact to consider is the impact the type of ownership can have on care costs. Local authorities have the right to recover costs for long term care from the sale of the property. For homeowners who are tenants in common, the local authority can only recoup costs from the share of the person who receives the care. If the house is jointly held they could recoup costs up to the full value of the property.

In addition, unlike joint tenants, for those who are tenants in common the share ownership does not automatically go to the other if one owner dies. As a result, an owner can pass on their share of the property to a third party in a will.

Ian Williams, spokesman for Ocean Finance, said: “The benefits of buying a house together as tenants in common are becoming better understood by homebuyers. With more couples getting financial support from families with their deposit, or putting in their own savings, splitting the ownership allows them to preserve their share. And for older borrowers it offers some protection from care costs.

“The good news is that it isn’t too hard for joint tenants to split their tenancy if they need to – you can either download the forms from the Land Registry and do it yourself, or get help from a solicitor or conveyancer.”

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