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How do we own our property?
| | HOW TO OWN OUR PROPERTY?
There are two ways of owning property jointly. Both your names will appear on the legal documents and to the outside world you will be simply regarded as co-owners. However, there is an important distinction which deals with the ¡§beneficial interest¡¨ (or the equity) in the property. The differences between the two kinds of ownership are listed below. Please read through this carefully. We will discuss the matter when you come into the office.
1. Joint tenants
(a) What does it mean?
By owning the property as joint tenants you both own the property in indistinguishable shares: each one of you owns all of it and neither of you can say that you are entitled to a distinct or separate share.
(b) What are the consequences?
The main feature of this type of ownership is that should one of you die then the property is automatically transferred to the survivor without the need for a Will. It will not form part of the deceased¡¦s Estate and if you are married will not attract inheritance tax. In other words your share cannot be left to anyone and will simply pass to the other co-owner.
If you own the property as joint tenants the starting point in determining your shares will be that you are entitled to half the net sale proceeds each, regardless who has made contributions towards the purchase price, mortgage or to the household payments.
(c) Should we own property in this way?
Most married couples own property as joint tenants.
However, this may be unsuitable where this is a second marriage and one party is contributing a lump sum from a divorce settlement or you have children from a previous relationship to whom you may want to leave your share in the property.
It may further be unsuitable to a married couple where one or both of you are individually wealthy and where the equalisation of estates for inheritance purposes is a consideration to save tax.
2. Tenants in common
(a) What does this mean?
In this type of ownership you each own a distinct share of the property which can be quantified (ie you each own 50:50. 60:40 or any other proportion).
(b) What are the consequences?
Your share can be given away during your lifetime or on your death will be passed according to the provisions of your Will. In other words should one of you die then your share does not automatically pass to the survivor.
The Land Registry will enter a restriction on the deeds to prevent one of you dealing with the property without the consent or knowledge of the other thus protecting your interest.
Unless there is evidence to the contrary, a Court in determining your shares in the event of a dispute, will assume that you own the property in shares equal to your contributions towards the purchase price.
(c) Should we own property in this way?
This type of ownership is better suited to non-married co-owners of property and we advise you to own the property in this way if you are not married.
It may also be preferred in a situation where you are married but one (or both) of you has children from a previous relationship to whom you may wish to leave your share.
It may also be more appropriate where one of you has provided a majority of the deposit and you want to ensure that you receive your share back in the event the house is sold.
(d) Why should we have a Declaration of Trust?
In order to prevent disputes and litigation in the future it is recommended that your shares in the property are noted in a Declaration of Trust which is signed by you both and kept with the Deeds. It may be difficult to determine the ownership of the proceeds of sale when the property is ultimately sold without such a document.
As well as dealing with your shares in the property the Declaration could also deal with the following issues;
1 What would happen in the event that you separate? Is the property to be sold or would you like to allow one to buy out the other¡¦s share? 2
2 What would happen if one of you died and did not leave your share to the survivor? Would you like the survivor to live at the property rent free for a time?
3 Who should pay the outgoings?
4 What would happen if one of you failed to make you share of the payments?
5 What will happen to any furniture you buy together?
(e) Make a Will
It is advisable for everyone to have a Will dealing with their affairs but is particularly important if you own the property in this way. Reference should be made in your Will to the Declaration of Trust.
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