What is a tenancy in common?
BuyingConveyancingMortgages
When buying or selling property, understanding the different ways you can own property is crucial. One common form of property ownership is known as a “tenancy in common.”
Definition
A tenancy in common is a form of property ownership where two or more individuals hold shares in a property. These shares can be equal or unequal, and each tenant in common owns a distinct share of the property. It is in some ways best defined by contrasting to another common form of ownership, joint tenancy.
Comparing tenancy in common to joint tenancy
Tenancy in Common
- Shares: Owners can hold unequal shares according to their contribution or agreement.
- Inheritance: Shares pass according to the will or estate of the deceased.
- Timing: Shares can be acquired at different times.
- Sales and Transfers: an owner can sell or transfer their shares without permission of the other owners.
Joint Tenancy
- Shares: All owners hold equal shares.
- Inheritance: Upon death, ownership automatically passes to surviving owners.
- Timing: All owners must acquire their interest at the same time.
- Sales and Transfers: one owner requires permission from the other owners to part with their shares
Advantages of tenancy in common
- Customisable ownership
Tenancy in common allows for flexible ownership. Investors or co-owners can hold different percentages based on their investment or agreement, making it suitable for situations where contributions vary.
- Estate planning benefits
Since there is no right of survivorship, tenancy in common offers more control over inheritance. Owners can specify in their will who will inherit their share.
- Investment opportunities
This form of ownership can be particularly beneficial for property investors. It allows multiple investors to pool resources and invest in a property without needing to have equal shares and where they may not desire the other owners to automatically inherit their shares.
Disadvantages of tenancy in common
- Potential for disputes
With multiple owners, possibly owning unequal shares, there is a potential for disagreements over property management, maintenance, or sale. Clear agreements and communication are essential to avoid conflicts. Bear in mind, you may end up co-owning with people other than your original co-owners.
- Complexity in transfers
Selling or transferring a share can be more complex than in sole ownership. Each transfer may require legal processes and can affect the overall management of the property.
Conclusion
A tenancy in common offers a flexible and customisable way to own property, making it an attractive option for many buyers and investors. Understanding its features, advantages, and potential drawbacks is essential for making informed decisions. Whether you are buying, with friends/relatives, or investing in property, considering a tenancy in common could provide the right balance of shared ownership and individual control.
By understanding the nuances of tenancy in common, you can make better decisions that align with your financial goals and estate planning needs. For more expert advice on property buying and selling, you should speak to a mortgage broker or conveyancer, who will advise you on the financial implications and ownership implications respectively.
