Whenever two or more people purchase a property, they can own the property together either as Joint Tenants or as Tenants in Common. It is important to understand the variances between the two as they operate differently when one owner dies or wants to sell their interest in the property.
- Joint Tenants
When a property is owned as joint tenants, they together own 100% of the property. Therefore, if one owner dies, the surviving owner(s) become owners of 100% of the property. Joint tenancy is a closed circuit, one owner cannot sell or gift their share in the property to anyone else; the last surviving joint tenant will be the full owner of the property. This type of ownership is most common among married couples. Although ownership may pass automatically, it is still subject to the usual rules of taxation; so a surviving joint owner may be subject to Capital Acquisitions Tax.
- Tenants in Common
When the property is owned as tenants in common, each person owns a specific portion of the property. The portions do not have to be equal. The tenant in common owner can sell or gift their share in the property; the other owner(s) do not automatically acquire the property on a sale or on death.
This form of ownership is most common in commercial settings, amongst unmarried co-owners and between siblings. It is useful where owners contribute different proportions of the purchase price because the shares can reflect this. You can also hold in equal shares as tenants in common.
Where a Tenancy in Common exists, it is recommended that a Co-Ownership Agreement is put in place by any persons purchasing a property together to define the legal basis of what is essentially a financial relationship between them.
Co-Ownership Agreement
A Co-Ownership Agreement can provide clarity on the rights and obligations of each owner. It can introduce a mechanism to deal with termination of the agreement especially in situations where some co-owners may wish to sell the property and others may wish to retain it.
Generally, a Co-Ownership Agreement will set out:
- the share each party invested in the property and the share in which it will be owned.
- how the co-owners will contribute to the maintenance of the property.
- what conditions will govern the conduct of the parties should the relationship terminate, where one party becomes insolvent or wishes to sell their share of the property while the other does not, or on the death of one co-owner; and
- what share each owner will receive from the proceeds of the sale of the property.
If you have any queries regarding Co-Ownership Agreements, please contact a member of the property team below.
