For many people the best way to get onto - or move up - the property ladder is to buy a home with someone else. They might be your partner, a group of friends, or siblings.
But, what happens when it comes time to selling the property? Or, if one person wants to sell, but the other is keen to stay? What are your rights to the property?
In this article we look at joint property ownership: what it means, the different types, and the process of selling a jointly owned home.
'Joint ownership' is when two or more people legally own a property.
All the owners will be included on the title deed, and it's usual that they'll all have contributed financially to the purchase and maintenance of the house - though that doesn't always have to be the case.
Joint owners can either have an equal shares in the property (for example, half each), or they may agree to an unequal stake - perhaps if one owner is able to financially contribute more than another.
In the UK, there are two different legal types of joint ownership. You can either be what's called, 'joint tenants', or 'tenants in common'.
Whether you're joint tenants or tenants in common probably won't have much impact whilst you're living there. However, it can have legal ramifications if you decide to sell, or rent out your property - or if one of the owners passes away.
You can find out which type of joint owner you are by checking: the contract you signed when you purchased the house, the title deeds, or a Trust Deed relating to the property. Your solicitor or conveyancer can help you find this out too.
If you are 'joint tenants' both (or all) of you will own the entire property - rather than each having a separate portion of the house. If you've bought your home with your spouse or civil partner, you'll usually own it on a joint tenancy basis.
If you choose to sell your home, or rent it out, you'll split the amount you make evenly. And, if one owner passes away, their share will automatically pass to the surviving owner(s).
Tenancy in common is a little different. Rather than owning the entire property together, tenants in common each own a particular share of the property. These shares might be equal, but they don't have to be. For example, one person could own a 70% share in the property, and the other a 30% share.
Unlike joint tenancy, if you sell or rent out a home you own on a tenancy in common basis, you'll divide the amount you make based on each owners legal share of the property. And, if one of the owners passes away, their share is dealt with according to their will - rather than automatically transferring to the surviving owners.
If you are tenants in common, it's likely that you'll have had what's called a 'Trust Deed' drawn up at the time that you bought the property.
A Trust Deed, also known as a Declaration of Trust, lays out your rights to the property. For example, it'll detail: who owns which share of the property, the responsibilities of each owner (in terms of paying things like utilities bills, and maintenance costs), what should happen if someone wants to sell or rent out their share, along with any other details that could help to resolve potential disputes in the future.
While it won't necessarily make much difference whilst you own the property together, the type of ownership arrangement you have will have a significant impact on your rights to the property (and any profits) if you do decide to sell up.
If you are joint tenants you both have to agree to sell before the property can be put on the market. If you both agree, you'll sell your property as normal and split any amount you make equally between you.
Can I be forced to sell a jointly owned house?
If only one of the owners wants to sell, they will have to apply to the court to force the sale. It will then be at the court's discretion whether the sale will go ahead. Usually they will take into account the co-owners personal and financial situations, and any dependents such as children, or elderly relatives, who live in the house.
Tenants in common
Unlike joint tenants, tenants in common have to sell at any time that one of the co-owners wishes to sell the property.
Usually the Declaration of Trust will include instructions on how the other owners can buy the share of the owner that wishes to sell, and they'll have first right of refusal to do so. This means if you don't want to sell, you'll get to purchase the share before the property is advertised to other buyers.
If the property ends up being sold, the amount made will be split between the owners depending on the size of their share.
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If you're lucky enough to have a second home, such as a holiday home or buy-to-let, in England and Wales, joint ownership can be a useful way of reducing the amount of Capital Gains Tax you have to pay if you decide to sell.
For example, in the tax year 2020/2021, the individual Capital Gains Tax allowance was £12,300. If you sell a second home that you own by yourself, you'd pay tax on profits made above this £12,300 allowance.
However, if the second home you'd like to sell is jointly owned, both you and the co-owner can put your annual Capital Gains Tax allowance towards any profits made. If you're a married couple for example, you'd only have to pay tax on any profits over £24,600.
If you're planning on buying a property as joint owners - or currently live in one - there are a few things you can do to improve security, and make dealing with any potential issues much easier.
Selling, breaking up, or passing away, may be the last things from your mind when you're buying a property with someone. However, having a plan in place for the worst will give you extra security should anything change in the future. Make sure everyone is happy with the rights they have in the property before you proceed.
If you're unsure what will work best for you, you can seek legal advice from your conveyancer.
Regardless of which type of property ownership arrangement you have when you buy a property, it's possible to change it at any point. Think carefully about what will suit your needs. You may decide joint tenancy works best for you as a married couple. However, tenants in common might be more appropriate if you want to ensure your share in the home is inherited by your children, or you're sharing a buy-to-let property with business partners.
Note: A change in type of joint ownership does not have to be done by mutual consent. One joint owner can serve a 'notice of severance' on the other owner, after which a court will decide upon the case based on the specific individual circumstances.
If you need to take out a mortgage to purchase the property together, be open and careful about moving forward with a joint mortgage. If one person has a poor credit score this will impact the rates available for all of those applying. And, you will all be liable for the debt. So, if one of you is unable to pay, the lender is legally allowed to place the burden of repayment on the rest of the owners. Honesty and trust about your financial situation is key.
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