23 May, 2018
When a property is owned by more than one person/entity then it needs to be decided exactly how the parties are to hold the property. This may seem like a strange question, but in reality it can be very important.
Legally a property will be jointly owned by any party that is listed as a 'registered proprietor' on the title register as recorded at the Land Registry (in the case of registered property) or in the relevant Deeds (in the case of unregistered property). This is separate to what is known as the "equitable interest" of the property. The "equitable interest" is often the most crucial part as it determines on what proportions the property is held by the parties and therefore the value of their interest. This becomes particularly important when the property is sold and the proceeds of sale have to be distributed.
For illustration purposes; if Party A, Party B and Party C are all legal owners of a property, the legal position would be that they are all joint owners. In terms of equitable interest, it may be that Party A has a 50% interest in the property, whereas Party B and Party C may only have a 25% interest each. This will obviously have an impact if the property is sold and the proceeds of sale are to be distributed; Party A would understandably want a share of the proceeds to reflect its 50% share. Equitable interests and the size of the same are determined by a number of factors relating to contributions towards the property.
Another factor to consider is whether the property is to be held as Joint Tenants or Tenants in Common;
Joint Tenants hold the property equally (effectively the property is held as one between the Joint Tenants) and have equal rights over the whole property. When anything happens to one of the Joint Tenants, their share automatically passes to the remaining Joint Tenant(s) under what is called 'survivorship'. This means that a Joint Tenant's interest in a property cannot be passed to others under a Will.
Tenants in Common own individual shares of the property and therefore when anything happens to one of the Tenants in Common, their share does not automatically transfer to the surviving Tenant(s) in Common and can be passed to others under a Will.
As the above illustrations demonstrate, whether a property is held as Joint Tenants or Tenants in Common can have a major impact. It is therefore very important that parties take legal advice on the same and make sure that the equitable ownership of a property is correctly recorded at the outset to avoid issues further down the line.