Property co-ownership: how to hold property?
This is an often overlooked or misunderstood question, but a very important one for anyone who co-owns a property or land in the UK.
The simplest form of home ownership is sole legal owner and there is nothing to declare to the Land Registry in this scenario. If there is more than one party purchasing a property then you will need to decide how to hold the property. This could be by reason of a purchase, or for example, inheritance. You can hold the property either as beneficial joint tenants or tenants in common.
If you decide to hold the property as joint tenants, both of you will own the entire property and you will have equal rights. You will not each hold a quantified share in the property and will not be able to leave a share of the property in your Will.
If you sell the property, or for example if your relationship breaks down, it will be presumed that you both own the property equally, regardless of your respective contributions to the purchase price and associated costs such as stamp duty and fees. On the death of one co-owner, their interest in the property would automatically pass to the remaining co-owner(s) without any further action regardless of what may be stated in their Will. The surviving co-owner would then own all of the property and on their death it would form part of their estate. This is known as the “right of survivorship”.
Married couples or those in a civil partnership commonly use this method of co-ownership because the right of survivorship makes it straightforward to inherit each other’s shares in the property.
However, there may be reasons not to become joint tenants. For example, if one of you has made a larger contribution to the purchase price of the property and you would want this to be recognised if the property is sold or if you separate. A joint tenancy is also not suitable if you have a family from an earlier marriage and wish to leave your interest in the property to them, instead of passing it to the other co-owner.
Tenants in common
If you hold a property as tenants in common, each of you will own a specified share in the property. Your shares may be equal (in the absence of any statement to the contrary), but they do not have to be. Alternatively, you can specify what share of the property belongs to each owner e.g. 70:30 or 80:20 by way of a separate document setting out these interests.
Any share of a property can be passed on to another person, either by Transfer or under your Will. If there is no Will at the time of your death then your share will pass in accordance with the rules of intestacy.
If you choose to hold the property as tenants in common, then you should sign a declaration of trust. A declaration of trust is a document that formally records that you hold the property as tenants in common and sets out your respective shares in the property. If you sell the property, or if you separate, the declaration of trust will be referred to, to work out your entitlement to the sale proceeds from the property.
The Declaration of Trust may also include terms such as giving you first refusal to buy out the share of the party wishing to sell.
Holding the property as tenants in common may be appropriate if you have children from previous relationships and would prefer them to inherit your interest on your death rather than your co-owner. Holding the property as tenants in common in unequal shares may be desirable if you have made unequal contributions to the purchase price of the property.
Note that Land Registry allow up to four legal owners (Proprietors) to be registered on the title so if there are five or more, then a Deed of Trust must be drawn up to name the additional Beneficiaries.
How to determine how you hold a property
You can find out how the property is currently held by looking at the Land Registry Office Copy Entries. The Proprietorship Register will not state Tenants in Common or Joint Tenants but instead the wording of a Form A restriction in the title register as follows will indicate that the property is held as Tenants in Common:
‘No disposition by a sole proprietor of the registered estate (except a trust corporation) under which capital money arises is to be registered unless authorised by an order of the court.’
If the wording is not present, then this would suggest the proprietors own the property as Joint Tenants.
How to change the ownership
Circumstances can change, and you may want to change how you hold your property. Land Registry will not charge a fee for removing a restriction but they charge £20 for entering a restriction onto the title.
If you decide to hold the property as joint tenants but then wish to split your interests, you can “sever” the joint tenancy and turn it into a tenancy in common at any time. Either party can sever the joint tenancy without the other’s agreement or the joint tenancy may be severed automatically in several situations, including where one party becomes bankrupt. This may also be required for example if your relationship breaks down. A Notice of Severance can be served by one owner on the other followed by an application to Land Registry to enter a restriction using their Form RX1.
Conversely, if you marry, you may wish to change from being tenants in common to joint tenants and an application made to Land Registry to withdraw or cancel the restriction using their Forms RX3 or RX4.
It is also possible following the death of one joint tenant to retrospectively sever the joint tenancy via a “Deed of Variation” to redirect the deceased joint owner’s share to someone other than the surviving joint tenant.
Make sure that you advise your Solicitor before completion as to how you wish to hold the property. Sherrards Solicitors will provide you with a “Joint Tenancy Form” to complete at the outset of the transaction. You should take proper legal advice on your options based on your personal financial situation. You should also ensure your Will is up to date. Sherrards Solicitors Private Client Department are able to provide advise accordingly.
Farewell Help to Buy
The Help to Buy scheme was introduced in 2013 to provide equity loans towards the cost of buying a new-build home, and helped over 500,000 first-time buyers buy a property. Although it has helped many, the Government has no plans to extend the scheme and time is running out for those in the middle of transactions and building.
Conveyancers, solicitors, estate agents and homebuilders dealing with Help to Buy matters need to add these dates to their calendars: 17th and 31st March 2023, and here’s why:
Friday 17th March 2023
Homebuilders must have finished building homes, using Help to Buy, on or before 17th March so that they are ready to be lived in. This is called Practical Completion, and it is when your home is built and has received a new-home warranty. After this date, the property will not be able to use Help to Buy.
Friday 31st March 2023
The Help to Buy scheme ends on this date. Home buyers need to have legally completed their purchase using the Help to Buy: Equity Loan by this date.
Funding for Help to Buy is unavailable after 31st March 2023 under any circumstances so purchasers that legally complete after this date will not qualify for a Help to Buy: Equity Loan.
If you are currently having a house built, or are in the middle of trying to complete your conveyancing, now is the time to check with your home builder, conveyancer and estate agent that these dates will be met so you still qualify for the scheme.
For more information regarding Help to Buy closing, please follow this link to go to The Government’s website.
She works closely alongside Asha Ngai, Gill Talbot, and Masood Haider to ensure all residential matters are handled so that our clients can buy and sell their homes with little to no fuss.
She has over 30 years experience dealing with conveyancing matters, and works hard to ensure client transactions are dealt with smoothly and efficiently.
Don’t believe us? Click here to find out more on ReviewSolicitors.com
Leasehold Reform (Ground Rent) Act and what it means for you
In an attempt to make the leasehold system fairer, Royal assent was granted for the Leasehold Reform (Ground Rent) Act 2022 on 8th February 2022.
On the 23rd June 2022 Government Guidance published the following:
“The Act will make home ownership fairer and more transparent for millions of future leaseholders. The reputation of the leasehold system has been damaged by unfair practices that have seen some leaseholders contractually obligated to pay onerous and escalating ground rents, with no clear service in return. The Act will prevent this from happening in future, tackling significant ambiguity and unfairness for future leaseholders.”
For the Act to apply, and the lease to be defined as a “regulated lease”, certain criteria must be satisfied. The lease must:
- Be a long lease (more than 21 years) of a single dwelling
- Be granted for a premium (purchase price)
- Be granted on or after the commencement date, which in most cases is regarded as the 30th June 2022 (the date the Act was brought into force)
- Not be considered as an “excepted lease”
If the above is satisfied the landlord must not require a leaseholder to make a payment of prohibited rent (which includes ground rents) nor can the landlord charge an administration fee for collecting rents.
As far as the Act is concerned a permitted rent is a peppercorn rent which has been defined by the Act for the first time as “an annual rent of one peppercorn”.
As well as the Act reducing ground rents to a peppercorn it also protects leaseholders against landlords charging an administrative fee for collecting peppercorn ground rents so as to ensure leasehold properties are more affordable and further to reduce the incentive to charge a leaseholder an actual peppercorn ground rent.
So what does this mean for leaseholders/future leaseholders/you?
The Act does not currently apply to existing leases however, should there be a surrender and re-grant of a lease which extends the term or adds additional property to the demise, there is a possibility the Act may apply subject to the qualifying criterial being met.
There are however, certain leases to which the Act does not apply. These include:
- Business leases
- Statutory Lease extensions
- Community Housing Leases
- Home Finance Plan Leases
- Retirement homes up until 1st April 2023 after which it is proposed the Act will apply
Should Landlords fail to comply with the Act, they could face penalties from £500 to £30,000.
She works closely with Caroline Vernon, Shen Hussain, Claire Levy, and John Brian, to assist their clients and ensure all residential matters and handled and completions are finished to the Sherrards standard.
That’s it – no fuss, just facts.
Buying Real Estate in the UK
The first stage for an investor or owner occupier will be ascertaining the area to invest in and ultimately locating the property to purchase.
When viewing properties in the UK, you should be aware of the legal way in which you are able to hold a property. You will either obtain the freehold of the property, which includes the whole of the building and will allow you the freedom (subject to any landed estate retaining restrictions over the property and any local council requirements) to make alterations and improvements as you so wish.
The alternative way of holding a property by way of leasehold interest, either a new lease will be granted to you (usually on a new build property) or assigned over to you from the existing owner. The terms of leases are usually 99 years, 125 years or 999 years and the balance of the term will be transferred to you. This will mean that although you have a long-term interest in the property, you do have a landlord who owns the freehold building. You will be subject to service charges and ground rents, paid to the landlord and it is imperative that your advisor provides you with such details of not only current expenditure but planned future expenditure. These are additional charges that should be borne in mind, particularly when viewing an up market and exclusive development with shared facilities such as a gymnasium or swimming pool. You also need to investigate whether the building is properly managed.
If you are purchasing a leasehold property, when you view the property you need to look out for any improvement works required to the building as a whole, as you will be responsible via your service charges to contribute towards the cost of these items. If the internal elements of the property require internal upgrading, then depending on the terms of the lease, landlord’s consent may be required. In addition, the alteration works will require consent from the local council.
Tax advice should be obtained at the outset, to consider the most tax efficient purchasing vehicle due to the additional SDLT and ATED charges in place. Consideration of personal tax structures and whether the individual is to be based offshore will be required.
It is prudent to consider any requirements in respect of timings and when a seller will require you to commit to a contract and then legally complete. It is increasingly the norm for exchange to be required quickly and a non-refundable deposit payable to ensure exclusivity, with completion to take place soon thereafter. This may impact on financing arrangements and the speed of which funds can be transferred and lending facilities put in place.
What is clear is the greater the value of the asset, the greater the need for sound real estate and tax advice. Please do contact us so that we can assist you with your needs in the UK residential market.
To find out more, click here to speak to Residential Property Partner Caroline Vernon.
Property questions: How to combat property fraud
Unsurprisingly, properties are also at risk when they are tenanted, and where there are no mortgages registered. Add to this the general rise in identity theft and owner occupiers should be extra vigilant and look for ways to protect themselves and their property.
There are several simple tools available to combat fraud:
Address for Service
Did you know you can add up to three addresses for service on the property register?
At least one of these must be a postal address, in the UK or Internationally. The other two addresses can be either a DX address, a UK or overseas postal address or an email address. By having more than one address for service, you limit the chances of any important correspondence from the Land Registry being intercepted.
How to add additional addresses on to the property register?
Click on this link to see more www.gov.uk/government/publications/updating-registered-owners-contact-address. Form reference COG1.
Property Alert Service
A free service offered by Land Registry is the Property Alert Service. You can register up to ten properties. Email alerts will be sent to you when certain activity occurs on your monitored properties. Setting up an account takes as little as 5 minutes and requires a few simple steps:
- Your name
- Your contact details
- Your contact address
- Setting a password
- Activating the account with the link sent to your provided email address
It is very quick and easy to set up alerts and can take as little as five minutes! All Land Registry requires to create an account is your name, contact address, email address and password. An email is then sent to you containing a link to activate the account.
For further information see https://propertyalert.landregistry.gov.uk/.
You can add a restriction to the title of your property. There is no fee for this service if the restriction is placed at the time of the purchase, otherwise it is an additional £20.00.
By adding the restriction, additional responsibilities will be placed on the Solicitor acting on a sale as the title will contain the following clause – “No disposition of the registered estate by the proprietor of the registered estate is to be registered without a certificate signed by a Conveyancer that the Conveyancer is satisfied that the person who executed the document submitted for registration as disponor is the same person as the proprietor.”
For helpful information, follow: https://www.gov.uk/government/publications/restriction-by-owner-not-living-at-property-request-registration-rq.
To find our more, click here to speak with Gill Talbot.
To answer more of your property questions, click here for the second article in the series.
Property Questions: What are deeds?
Essentially, Deeds are the trail of legal documents that prove or record the ownership of a property. Since 1990, on the sale of a property, it has been mandatory to register the ownership at Land Registry. When Land Registry complete the registration process, they provide an Official Copy of the Registry and an Official Copy of the Title Plan together known as the Official Copies of Title. These were historically on paper but are now mostly digital and these are what are considered to be the “Deeds”. However, there are additional documents that make up the “Deeds Pack” or “Title Deeds” that will be required when you come to sell the property. The Deeds Pack will vary depending on the type of property.
For Freehold properties, the Land Registry Official Copies of Title are usually the only relevant documents to retain and these are electronic so can be readily obtained from Land Registry.
Leasehold properties will require the addition of the original signed and dated Lease to be retained as Deeds, although an Official Copy of the Lease is also held digitally by Land Registry alongside the Register and Plan. There may also be further documents to add to the Deeds such as an original Share Certificate or an original Membership Certificate, if relevant. For new build Leasehold Properties, you should also retain your 10-year NHBC Certificate (or equivalent such as LABC or Premier Guarantee) along with the Building Regulations Completion Certificate.
Other general documents to keep with the Deeds include any indemnity policy or Declaration of Trust.
In preparing for the sale of a property, the Deeds Pack will be required alongside documents such as the Energy Performance Certificate, Electric and Gas Safety Certificates, FENSA certificates, building regulations and planning permissions for any alterations, party wall notices, listed building documents, guarantees/warranties for a new boiler/new roof/damp proofing, water bill, service charge and ground rent statements, mortgage details etc, so it may be advisable to retain these documents and keep them up to date as and when they expire. Having these documents to hand will save delays when it comes to selling your property.
It is also worth noting that if you have a mortgage then your Title Deeds may be kept by the Lender, although this is increasingly rare for UK Banks, but not so for overseas Lenders.
To find out more, click here to speak to Gill Talbot.
To find out more about your property questions, click here to read another article in the series.
Top tips when buying property
Here are our top five tips to help you:
Whether or not finance is needed, speak to a broker early on in a transaction and preferably before your agent agrees the main elements of the purchase. Raising finance once exchange has taken place, makes for a fraught completion experience for both you and your lawyer.
2. Planning the completion date
If you are selling a property to raise money for your purchase, ensure that the completion date of the sale is on or before the completion of the purchase. This may sound obvious but it will avoid surcharged rates of SDLT being paid at 3% above the standard rates. These rates are paid even where your main residence is being replaced with the Revenue requiring you to claim a rebate once the additional main residence is sold.
You can also avoid the need to use your cash reserves for a deposit, as a deposit held on your sale can be used for your purchase where the property is in England and Wales.
3. Surveyor’s appointment
Appoint a surveyor. He or she will flag items that you may not necessarily have spotted on your brief viewing and may even give some bargaining power and leverage on the price.
4. Your lawyer
Make and keep a relationship with a lawyer and update them on your transaction. This is particularly important where you are marketing a property for sale, to ensure that deadlines, that you or your agent impose, can be met by buyers. A full sales pack with all title deeds, up-to-date searches, planning and building information can be pulled together in advance.
Plan for exchange well in advance. Weeks of delay can be avoided if all the fact finding has been completed in advance. Attended exchanges do still occur so be prepared.If there are any title difficulties, these can be addressed in advance.
5. Your accountant
Take tax advice. You may not be resident in the UK, you may own other properties worldwide or hold a portfolio of investment property. Early tax advice will be required to work out your CGT (Capital Gains Tax) liability on sale and IHT (Inheritance Tax) liability on death.
SDLT matters will be more complicated, where other property is held and often a detailed assessment is required to determine the SDLT rates payable by you. Where your company owns the title to the property, ATED (Annual Tax on Enveloped Dwellings) charges will be made annually and your accountant will need to claim any exemptions in your annual tax return.
You may have very specific requirements which must be conveyed to all parties. You may want to access the property you are buying between exchange and completion with architects and builders to obtain quotes or for interior designers to start planning works. The seller may even agree to you commencing limited works to help you move forward quickly with your plans.
Where you are buying a bolt hole which is a leasehold property, a landed estate owner may own the freehold, for example the Grosvenor or Portman Estate. Do not be surprised when you are asked for onerous references to obtain the landlord’s consent, in lieu of a rent or service charge deposit.
If you are buying a turn key, consider if there are any service charges for the shared estate roads and whether building warranties for any building works are available.
Where you are buying expensive items of furniture, artwork, electrical items, to be left at the property, a full inventory of those items with costings will need to be included. Such items do not attract SDLT but they must be justifiable in their costings.