What Does Tenants In Common Mean When Buying Real Estate?

It’s an easily misunderstood phrase, so property buyers often ask me – what does tenants in common mean?

It’s also commonly confused with a similar sounding phrase with a very different meaning – joint tenants.

These two terms are different types of property ownership models. Before buying a property with someone else, it’s important for these co-owners to decide whether they want to be a joint tenant or tenant in common with the other person.

They need to confirm with HM Land Registry which type of agreement they have when registering a property.

So – what does joint tenants mean? And what does tenants in common mean?

In this guide I’ll explain what these two terms mean and outline their differences, including the implications for co-owners when it comes to selling or passing on a property to others.

Joint tenants definition

In joint tenancy property ownership, each co-owner has full ownership rights to the entire property, without distinct or quantifiable portions assigned to individual owners.

If they sell the property, they distribute the money evenly between themselves, irrespective of their individual financial contributions to the initial purchase or mortgage payments.

The absence of separate, transferable shares means that neither co-owner can independently sell a portion of the property.

A key feature of joint tenancy is the right of survivorship: 

• This principle dictates that upon the death of one co-owner, the surviving co-owner(s) automatically inherit full ownership of the property.
• This occurs regardless of any contrary instructions specified in the deceased’s Will concerning the property.
• Therefore, joint tenancy does not allow a co-owner to pass on the property to a third party through their Will.
• Instead, ownership is automatically transferred to the surviving joint tenant(s) upon one’s death.

This ownership structure is ideal for couples who intend to ensure that their partner inherits the property in its entirety upon their passing.

However, for those with blended or step families, this type of property ownership is less flexible than the one we’ll look at next – the tenancy in common approach.

Joint tenants is not the term used to describe multiple people renting a property from several households. For more information on this, read my article – do I need a HMO licence for three tenants? – about houses in multiple occupation.

Tenant in common meaning

The tenancy in common arrangement is also an option for those wanting to be joint property owners with their partner.

However, the key difference is that tenants in common retain the ability to bequeath their portion of the property to a different beneficiary upon their death.

In this type of agreement, a tenant in common’s share of the property does not automatically transfer to the co-owners in the event of their passing. Instead, they have the freedom to designate the recipient of their property share through a Will.

Under a tenancy in common, co-owners also have the flexibility to possess unequal shares of the property.

Key characteristics of a tenancy in common property ownership agreement include:

• Separate shares: Each co-owner has a clearly specified share of the property. These shares may differ based on predetermined agreements or – for example – individual financial inputs towards the property acquisition.
• Transfer rights: Co-owners retain the ability to transfer their property share without requiring approval from fellow co-owners. This enables one tenant in common to sell their share to a third party without impacting the rights or ownership status of the remaining co-owners.
• Inheritance: In the event of a co-owner passing away, they can pass on their property share to a designated beneficiary in their Will. Their share does not automatically go to the other co-owners.

Tenants in common often take out a deed or declaration of trust. This is a legally binding document that outlines the financial details of a joint mortgage arrangement.

It outlines what happens if circumstances change – for example, if the co-owners fall out, or one wants to sell the property, or one is unable to make their mortgage repayments. This document helps to protect co-owners and their investment.

Key differences: joint tenants vs tenants in common

Comparing and contrasting these two different types of property ownership, here are the main differences:

Joint tenants

• Have equal rights to the whole property
• Benefit from the right of survivorship – the property automatically passes to surviving owners if one of them dies
• Cannot sell individual shares independently
• Cannot leave a property share in their Will
• Receive an equal split of any sale proceeds, regardless of their previous financial contributions
• Are equally responsible for property obligations
• Act together in any legal matters

Tenants in common

• Can have unequal shares
• Revoke the right of survivorship i.e. a co-owner does not automatically receive another’s share if that person dies
• Can sell individual shares without other co-owners’ consent
• Can bequeath their property share in a Will
• Receive a share of sale proceeds in according to their share of ownership
• Can take individual legal action regarding their share

As you can see, there are several big differences between these two property ownership types. Choosing the right model is one of the many decisions a first time buyer needs to make if purchasing a property with someone else.

However, some time after the initial agreement, at least one co-owner may prefer a different setup and want to change from being a joint tenant to one in common, or vice versa.

Can you change between the two arrangements?

As mentioned, joint property buyers confirm their ownership model with HM Land Registry at the outset. However, they are entitled to change their type of ownership afterwards.

Changing from joint tenants to tenants in common is called a severance of joint tenancy and it involves registering a Form A restriction:

• It’s possible to make the change from being joint tenants to tenants in common without other owners’ agreement, according to the government. 
• A solicitor or conveyancer can serve a written notice to other owners – this is called the ‘notice of severance’.
• At least one co-owner must fill in form SEV or RX1 and submit supporting documents as part of their application to HM Land Registry.

In contrast, co-owners need the agreement of all other owners to change from tenants in common to joint tenants.

They need to update the deed of trust with the help of a solicitor or conveyancer, before filling in a form to cancel a restriction and submitting supporting documents.

Final thoughts

A long time after purchasing a property, some co-owners may be unsure whether they bought it as joint tenants or tenants in common.

But there are several documents likely to hold this information – including a property lease transfer, or deed.

For more details, here is a useful government guide – what kind of joint ownership do I have?

I hope you found my guide useful. For other helpful articles, take a look at the Fine Living blog.

Recent articles include eco friendly house – how to make your property more sustainable and what to know about being an accidental landlord in the UK.

If you have any questions or would like to ask about a property in the Fine Living portfolio, we are here for you! Please do not hesitate to get in touch.

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