Tenants in Common is a form of joint ownership of property, which allows multiple individuals to own a share or interest in a property, with each owner having their own distinct share. This type of ownership can be used in estate planning to ensure that a person's property is passed on to their chosen beneficiaries according to their wishes, through the use of a will. In this guide, we will discuss what tenants in common is, how it works, and how it can be used in a will to leave your property to those you care about.
What is Tenants in Common?
Tenants in Common is a form of co-ownership of a property, where each owner has a separate and distinct share in the property. This means that each owner can hold a different percentage of the property, and they are not required to have an equal share. For example, two individuals may hold a property as tenants in common, with one owning 60% of the property and the other owning 40%.
Unlike joint tenancy, which is another form of co-ownership, tenants in common do not have the right of survivorship. This means that when one tenant in common dies, their share in the property does not automatically pass to the remaining tenants in common. Instead, it forms part of their estate and can be passed on to their chosen beneficiaries.
Tenants in Common is often used when multiple people want to purchase a property together but do not want to have an equal share in the property or want to be able to leave their share of the property to someone else in the event of their death.
How does Tenants in Common work?
Tenants in Common allows for multiple individuals to hold a share in a property. Each tenant in common has their own distinct share in the property, which can be equal or unequal to the other tenants in common. For example, three individuals may hold a property as tenants in common, with one owning 50%, one owning 30%, and the other owning 20%.
When the property is sold, each tenant in common is entitled to their share of the proceeds of the sale. If a tenant in common dies, their share in the property forms part of their estate and can be passed on to their chosen beneficiaries. This means that the remaining tenants in common do not automatically inherit the deceased tenant's share of the property.
Tenants in Common can be used for a variety of purposes, such as:
To allow multiple individuals to purchase a property together, each holding a distinct share in the property.
To ensure that a person's share in a property passes to their chosen beneficiaries in the event of their death.
To allow a person to hold a share in a property without having to live in the property or be responsible for its upkeep.
How can Tenants in Common be used in a Will?
Tenants in Common can be used in a will to ensure that a person's share in a property passes to their chosen beneficiaries in the event of their death. This is often used in estate planning to ensure that a person's property is passed on according to their wishes.
To use Tenants in Common in a will, a person can specify that they hold their share in the property as tenants in common. They can then specify who they want to inherit their share of the property in the event of their death. This can be a specific person, such as a family member, friend, or charity, or it can be a group of people, such as their children.
For example, a person may specify in their will that they hold their share in a property as tenants in common with their spouse, but that in the event of their death, their share of the property passes to their children. This ensures that their share of the property is passed on according to their wishes, rather than automatically passing to their spouse.
It is important to note that if a person owns a property as joint tenants, they cannot use Tenants in Common in their will to pass on their share of the property. This is because joint tenancy includes the right of survivorship, which means that when one joint tenant dies, their share in the property automatically passes to the surviving joint tenant(s).
To ensure that a person's share in a property passes to their chosen beneficiaries in the event of their death, it is important to review how the property is owned and to consider using Tenants in Common in their will.
How to set up Tenants in Common
To set up Tenants in Common, the property's owners must agree to hold their shares in the property as tenants in common. This can be done by:
Drafting a mutual notice of severance - A document that outlines the current owners desire to sever the joint tenancy and have the property registered as Tenants in Common.
Registering the property - The property must be registered with the Land Registry to show that it is held as Tenants in Common. This can be done online or by post.
Once the property is registered as Tenants in Common, each tenant in common will hold a distinct share in the property, which can be passed on to their chosen beneficiaries in the event of their death.
A company such as East Sussex Wills can support you in doing so.
Conclusion
Tenants in Common is a form of co-ownership of a property, which allows multiple individuals to own a share or interest in a property, with each owner having their own distinct share. This type of ownership can be used in estate planning to ensure that a person's property is passed on to their chosen beneficiaries according to their wishes, through the use of a will.
To set up Tenants in Common, the property's owners must agree to hold their shares in the property as Tenants in Common and register the property with the Land Registry. It is important to review how a property is owned and to consider using Tenants in Common in a will to ensure that a person's share of the property passes to their chosen beneficiaries in the event of their death.