Living with other people has become increasingly popular in recent years.
With properties rising in price, finding other people to live with is one of the best ways to rent or buy a house affordably.
A written agreement with your co-tenants must be implemented when you do this.
A joint tenancy is one of the most common types of agreement.
Read on to find out what it is and when its used.
What is a joint tenancy?
A joint tenancy is a type of tenancy agreement between several people. It means that multiple names are on the tenancy agreement.
Often, this is formed between two people, but it can be done with many more individuals involved.
Joint tenants have equal rights to the property. You are all responsible for the same percentage of the rent and bills.
If one person fails to meet their financial obligations, it automatically falls on the other co-tenants. That’s why you must pick these people carefully!
If your house is sold, the proceeds are split equally. Payments received from renting out the property are also split 50/50.
If you die, your house ownership automatically transfers to the other joint tenants. You cannot pass it on to someone else in your Will.
When is a joint tenancy useful?
A joint tenancy arrangement is useful when you want your house ownership to transfer to your partner automatically.
This is common with couples who don’t have any children. It’s also useful if you are unmarried or don’t have a Will.
Other family members that live together benefit from this arrangement, too. Siblings or cousins are great examples.
This is particularly common if both people are unmarried.
Business partners have also been known to choose this method of ownership.
If you have both invested in the property as part of a ‘commercial transaction’ (i.e. to make a profit), your portion often transfers to your business partner if you die.
Advantages of a joint tenancy
Some experts argue that joint tenancy speeds up the probate process.
This is because the house is not transferred to several people, nor is its inheritance subject to debate.
This cuts down on legal fees when someone with a joint tenancy passes away.
Shared responsibility is a co-habiting arrangement that many people prefer.
It ensures that everyone pulls their weight. You don’t have some co-owners who pay significantly more of the costs than others.
Disadvantages of a joint tenancy
If you pass away while having a joint tenancy, you cannot pass your house on to anyone except your co-tenant(s).
This right of survivorship outweighs any Will. This is awkward if your desire to change occurs right at the end of your life, or if you have children.
A joint tenancy often becomes complicated if circumstances change.
For example, if two siblings have a joint tenancy, but one of them then gets married. Both parties need to agree on any sale of the house.
Is joint tenancy different to tenants in common?
Yes, these two types of ownership are different.
The most well-known alternative to a joint tenancy is ‘tenants in common’.
This is when several people co-own a house and are thus allocated shares.
These can be transferred between different people. And the shares are not necessarily split equally.
If someone passes away under tenants in common, the share of the house passes to whomever the individual names in their Will. If they don’t have a Will, the laws of intestate kick in.
Tenants in common work well if you want to pass your share onto your children one day. You can assign shares to them and give them a legal right to your portion of the house.
Alternatives to joint tenancy
The most well-known alternative to joint tenancy is tenants in common. We have explained this above. But it’s not the only option.
A ‘Cohabitation Agreement’ involves a contract that states how assets are divided if a relationship terminates. Everything is written down in the contract.
A ‘Declaration of Trust’ is similar. You have a contract stating what happens in certain scenarios.
How to get out of a joint tenancy
It is possible to get out of a joint tenancy. You have several options. Discuss these with a legal expert to ensure that you find the best solution for you.
Find your replacement
One of the most common methods is to find a replacement tenant. Your landlord and all joint tenants must agree on who this is.
You’ll then sign a new contract outlining the change in ownership.
End your contract
If you have a fixed-term tenancy, you might be forced to continue paying rent, even if you’ve moved out. That’s unless you can:
- Use a break clause
- Negotiate an early end with your landlord
- Undo the contract on grounds of being misled.
Whichever route you go for, make sure you have everything in writing. Get support from a lawyer or solicitor.
Some contracts say that you need to give your landlord notice before you move out, even if it’s nearing the end of your fixed term.
Check whether this is the case. You will need to put it in writing.
Find a new co-tenant
If you have a rolling tenancy agreement, the situation changes slightly. If one of your co-tenants stays in the house, even though you have moved out, you’ll still be responsible for rent.
In this case, you need to get your co-tenant to sign a new tenancy agreement with you removed. Or give your landlord a ‘notice to quit’.
Always seek legal advice
Make sure you get advice from a legal expert before pursuing any of these routes.
These matters sometimes end up in court. You must always follow the law so you don’t pay more than you should.
Can I switch from a Joint Tenancy to Tenants in Common?
Yes, this is possible. There’s no immediate fee to do this, although you’ll almost always need a legal expert to oversee the transition. This professional will charge you.
You do this using the Land Registry Form SEV. The process is known as ‘severing a joint tenancy’.
People often transition between the two if circumstances change. Perhaps you want to assign your share to someone that isn’t your partner.
Or maybe the two of you have fallen out. There are sometimes tax advantages to this approach, too.
When both parties agree to transition between the two types of ownership, paperwork is relatively straightforward. You’ll both sign your consent.
But if you disagree, it becomes far more complicated. These cases sometimes end up in court. Speak to a legal professional for guidance.
