BUYING WITH OTHERS – Possibilities and pitfalls

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In this fast moving world more and more people are prioritising their careers and travelling before marriage. As a result, there has been a significant increase in not only unmarried couples buying a property together but also an increase in joint ownership of property amongst family, friends and even business partners.

If you are thinking of purchasing a property jointly with someone else, you will need to think about whether you want to purchase as “joint tenants” or “tenants in common”. Each type is distinguished by the rights of the co-owners. The following article sets out the key difference between the two and their respective pros and cons. If you are considering such a move, it is important that you are fully aware of the consequences of such shared ownership.

Usually, the word “tenant” is used to describe the person renting or leasing a property. In the context of shared ownership of property, a “tenant” is one of the co-owners of the property.

What is the difference?

With tenancies in common, the title to the property is held by two or more persons whereby each hold an individual, undivided ownership interest in the property. The share held by each could be equal or not. Nevertheless, even if the percentage of the interests are not equal, or the living spaces are different sizes, all co-owners have an equal right to use the property.

Co-owners do not need to agree to sell. Each can sell their share separately.

With joint tenancies, each co-owner holds an equal share and interest in the property.

Right of Survivorship

The right of survivorship determines what happens to a certain type of co-owned property when one of the co-owners dies. It is the main difference between joint tenancy and tenancy in common.

The right of survivorship does not apply to tenancies in common. In tenancies in common, the death of one co-owner shall have the effect of transferring the rights of the deceased tenant in favour of their heirs. This means that each co-owner can choose who they want to gift their share in the property to on death. Where the co-owner has put a will in place, whoever is named in the will shall take the interest in the property. Where there is no will in place, the deceased co-owner’s next of kin shall take their share. Whether there is a will in place or not, upon the death of a tenant in common, there must be a grant of probate/letters of administration to transfer the interest.

In joint tenancy, co-owners enjoy the right of survivorship. This means that when one of the joint tenants dies, the ownership of the remaining property automatically passes to the surviving tenant(s), or successors, who assert right of survivorship.

The right of survivorship is a very powerful legal right because it takes precedence over other claims upon a property where it applies.

If a deed is silent as to whether a property is to be co-owned as joint tenants or tenants in common, the presumption is that the tenancy is joint. The presumption, of course, can be rebutted if words of severance are used. These are words that indicate that the property is to be held in separate shares, be it “in equal shares” or, more obviously, setting out the amount of each co-owner’s share, for example, “60:40” or any other division of shares that the co-owners may agree on.

The presumption can also be rebutted if the co-owners made unequal contributions to the purchase price, or if a property is purchased for commercial purposes.

What is the best option for you?

There are benefits and pitfalls to each type of concurrent ownership. A joint tenancy can help avoid the delays and cost of probate when one of the co-owners dies if the intention is that the surviving co-owner(s) are to keep the property. For the benefit of continuity, this type of concurrent ownership is beneficial. With joint tenancies, the responsibility of all co-owners is equal too.

On the other hand, by owning property as a joint tenant, the surviving co-owner(s) may use the property in any fashion they see fit, whether that means holding it, selling it or mortgaging it. In fact, the law states that immediately upon the death of a co-owner, ownership is transferred to the surviving co-owner(s). It can therefore be dangerous if there is an unstable relationship between the joint co-owners, regardless of whether the relationship between them is personal or professional.

Similarly, where one or both of the parties have children from a previous relationship, they may wish to leave their share of the property to their offspring, This could only happen under a tenancy in common.

Either way, whichever way you choose to purchase, there are pros and cons to each type of concurrent property ownership. You just have to consider which option is more favourable to you.

words | Suzika Santiago, ISOLAS