Vive La Difference

When acting for clients, specifically couples, in the preparation of Wills and the giving of tax advice, as part of the fact find I need to know whether they hold their property as “tenants in common” or as “joint tenants”.  Very few people know the answer to that question, and even fewer know the difference.  It is a question which is frequently asked, and so this seems as good a place as any to offer an explanation.

A couple of preliminary points.  Firstly, whether you hold as joint tenants or tenants in common makes absolutely no difference to the value or marketability of the property.  Further, the word “tenant” is simply a throw back to the fact that, historically, land in the U.K. vests in the Crown.  The fact that it is a tenancy in common or a joint tenancy does not indicate that you own anything other than the freehold.

If you and your husband or wife or partner own a property together as joint tenants, then the effect of that is that on the death of one of you the property will pass automatically to the survivor, and this is true, even if the survivor in his or her Will has left their estate elsewhere.  Rather like a joint bank account, the property passes simply on the basis of survivorship and nothing else.

In contrast, a tenancy in common means that each joint owner has a specific share of the property in his or her own estate.  With a tenancy in common, it is not necessary that it should be in equal shares.   Thus, one tenant in common may have 99% of the property in his or her estate, and the other tenant in common just 1%.  The vital difference is that on the death of a tenant in common his or her share of the property is included as part of his or her estate, and passes therefore by Will or intestacy.

Certainly when undergoing tax planning it is better generally if property is held as tenants in common, rather than as joint tenants.  This is because it gives greater flexibility, and the deceased’s share of the property is available to be used in any tax planning exercise.

How do you know if you are joint tenants or tenants in common?  If your property is unregistered and you have a bunch of title deeds, including a conveyance, then it will tell you.  You will have bought the property as joint tenants or tenants in common.  If, as is more likely the property is registered at H.M. Land Registry, then the Land Certificate will tell you.  If the Land Certificate in the Proprietorship Register simply shows your name and address then you are joint tenants.  If your name and address is followed by a Restriction, then you are tenants in common.

If you hold a property as joint tenants and wish to create a tenancy in common instead,  the procedure is very simple.  The joint tenancy may be severed by both parties signing a notice to that effect, which is then held with the title deeds or registered at H.M. Land Registry.

Another but unrelated cause of confusion is the so called Common Law Wife or Common Law Husband.  The fact is that there is no such thing.  You are either married, or you can now be civil partners under the Civil Partnership Act 2005 (limited to same sex partners), or you cohabit.  If you are married or civil partners then there are tax breaks available to you, which are not available to cohabitees.  Furthermore,  married couples and civil partners have rights of succession, which again are not available to cohabitees.  All is not lost however.  If you and your partner have lived together “as husband and wife” for more than 2 years, then on the death of one the survivor may have a claim under the Inheritance (Provision for Family and Dependants) Act 1975, and a claim under the Act would also be available if the survivor were being maintained by the deceased immediately before his or her death.  It is not a very satisfactory state of affairs, and a very good reason indeed, particularly for cohabitees, to make a Will.

 

David Endicott

February 2006