There are several legal procedures to be followed when a property is held under co-ownership. The following paragraphs explain how conveyancing is affected when there are two or more owners in the property.
When two or more people have interests in a property, they are said to be in co-ownership of the concerned property. A day-to-day example of this is when people buy a house together. In co-ownership, a trust of land occurs and the legal estate is held by the persons that purchased the property as trustees for themselves. While the legal interest in the property can only be held under joint tenancy, the beneficial interest in that property can be held either as joint tenancy or as tenants in common.
When buying a property for co-owners, the conveyancing solicitor should conclusively state how the beneficial interest is to be held or else the property would be considered to be held in joint tenancy. Therefore, when two people own a property as co-owners it is assumed that the property is held in joint tenancy unless otherwise specified. Thus, when one person dies, the other automatically becomes the sole owner by inheriting the property of the deceased. This assumption does not hold true when words of severance (distribution of beneficial interest) are specifically mentioned, or there exists a presumption of tenancy in common. Tenancy in common is presumed when the money for the purchase of property is provided in unequal shares or when property is purchased by a business partnership. The usage of words such as ‘in equal shares’, ‘equally’, ‘half and half’ creates a tenancy in common (in other words individual shares). But the word ‘jointly’ creates a joint tenancy.
Joint Tenancy:
All joint tenants are entitled to an equal share to the property; there are no individual shares. When the property is sold, the proceeds are distributed equally between them. Thus, if there were two partners, each of them would get 50 per cent of the money.
A distinctive feature of joint tenancy is the right of survivorship- when a joint tenant of a property dies, his interest in the property is automatically transferred to the remaining joint tenants. For instance, if a property is held in joint tenancy by three people, and one person dies, his share in the property is automatically transferred to the other two survivors. On death of the other joint tenant, the lone survivor becomes the absolute owner and has legal and equitable interest in the property.
Tenancy in Common:
When people hold a property as tenants in common, the right of survivorship does not apply, and on the death of one owner, his share is distributed as per his will or intestacy. Such tenants in common may or may not have equal share in the property.
Such a form of tenancy is preferred only when co-owners wish to control the transfer of equitable interest. While private individuals may sometimes opt to be tenants in common, such an arrangement is usually preferred by partners in a business to ensure that their share is transferred according to their will and does not automatically transfer to the surviving partners. For instance, when two people who are business partners hold a property as tenants in common, the share of the deceased person is automatically transferred as per his will or intestacy. The legal interest that is under joint tenancy is held by the survivor partner on trust for himself and the estate of the deceased partner. Such a trust over land remains until a second trustee is appointed on sale to ensure that the trust is overreached.
When people own a property as tenants in common, it is advisable that they spell out their share in the estate, expressly agree and record the same in a deed of trust or a certified copy transfer. This deed should be signed by all parties concerned and kept safely. This deed or statement can be altered only by the consent of all parties to the property.
Read more: Shared ownership: Land Registry Practice and Severance of Joint Tenancy
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