Tenants in Common

‘Tenants in Common’ and ‘Joint Tenants’?

When you buy a property jointly with someone else the property can be held in one of two ways. It can either be held as ‘Joint Tenants’ or ‘Tenants in Common’. In a Joint Tenancy each of you own the entire property so when one of you dies the surviving owner automatically becomes the only owner. This means that property held as Joint Tenants can not be disposed of in a will as each tenant owns the whole property. It is common for married couple to buy property as Joint Tenants.

With Tenants in Common whilst the property is owned jointly each owner owns a share of the property. This is normally split half and half but it doesn’t have to be. With a Tenancy in Common as each owner owns a distinct share of the property they are able to leave it as a legacy in their will to whomever they choose.

Advantages of becoming Tenants in Common?

The key advantage to becoming Tenants in Common is to save on Inheritance Tax (IHT). There is no IHT is due on assets left between husband and wife so the surviving partner is not required to pay IHT. However when the second partner dies those who inherit the estate, in most cases the children, will be liable to pay IHT if it is above the IHT threshold (currently £275,000). This is where the advantage of being Tenants in Common comes in to play. By splitting the home in two, the half belonging to the first partner to die can be passed straight onto their children and as long as it is below the IHT threshold no IHT is due. Then when the second partner dies, their half may also be below the threshold, so again the children would miss paying IHT.

How to sever a Joint Tenancy and become Tenants in Common

If you no longer wish to be joint tenants it is a straightforward process to change the terms of ownership so that you are tenants in common.For this to happen you will need to serve the other owner with a notice of severance. This is a simple legal document that you can either have your solicitor prepare for you. Alternatively you can buy a template ‘Notice of severance of a joint tenancy’ online and complete the document your self.

Once you have served this notice of severance you should inform the Land Registry in writing of the severance.