What is the difference between joint tenants and tenants in common?

Increasing property prices have made it even more challenging to buy a house. To get around this hurdle, some friends or relatives are choosing to buy a house together by pooling their resources and taking out a joint mortgage. However, getting a joint mortgage also means jointly owning a property and it’s important to select the right ownership structure to avoid any problems down the line.  

Typically, there are two common ways in which you may own a home with someone else – as joint tenants or tenants in common. The joint tenant structure is more popular with couples buying a house together as the title to the property automatically passes to the surviving member when one of the joint tenants dies.

On the other hand, when you're buying with friends or siblings, you may consider using a  tenants in common structure so that each party can own their respective share of the property independently. 

Joint tenants vs. tenants in common

People buying a house together can share their mortgage as joint tenants or tenants in common. In a joint tenancy mortgage loan, all the parties are equally responsible for the mortgage and equally entitled to the property. In the instance that one owner passes away, their share automatically goes to the other surviving partner or partners. If you’re considering this arrangement, you need to keep in mind two important things. Firstly, you won’t be able to pass on your share of the property to anyone in your will if you take out a joint tenant mortgage loan. Secondly, you won’t be able to sell the property at any time unless all the joint tenants agree.

On the other hand, tenants in common have their own share of the property that can be passed on in their will or sold whenever they please. As tenants in common, you can jointly choose how to divide the mortgage and everybody doesn't need to own an equal share of the property. It could be 50-50, 70-30, or some other ratio. Such an arrangement could thus be helpful when loan applicants are investing different amounts of money into a property. 

It may also be simpler to exit the partnership as tenants in common. If tenants in common decide to part ways, one partner may offer to buy out the other partner's share. Or, a share may be sold or gifted to someone else, unless there's a provision to the contrary in the ownership agreement drawn up by the parties.

You may consider being tenants in common if you're buying with a group of friends. Partners with children from a previous relationship may also consider this arrangement to ensure their respective children benefit from their wills.

If you’re considering purchasing a property with family members or friends, it may be helpful to speak with a solicitor to understand the pros and cons of each form of ownership. A legal professional will apprise you of the risks and help you determine the best possible arrangement for your situation. Additionally, you may consider drawing up a co-ownership agreement to document the next steps in the event of a dispute about the property. A lawyer will help you prepare and execute such an agreement, outlining each co-owner's rights and responsibilities to avoid any future problems.

It's also worth remembering that, irrespective of how the property is owned, all the co-owners who take out a joint mortgage are jointly and severally liable for it. This means all the owners are 100 per cent responsible for the loan irrespective of their ownership share. So, if you take out a mortgage with your brother and he is unable to make his monthly repayments, you'll be liable for making the complete repayments, or the loan could go into default. That's why you need to be very sure of the arrangement and trust the people you're buying with.

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