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.
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.