Sometimes, buying a property alone may not be the right option for you, based on your finances or your lifestyle. Buying with others, be it a partner, friends, or family members, could allow you to borrow more for a mortgage and share the load on repayments and other bills. Up to 4 people can legally own a property in the UK, but make sure you’re buying with people you trust, as it is a big investment with a lot of responsibility.
If you want to own a house or flat with someone else, Tenancy in Common is one of your options for joint ownership.
What is Tenancy in Common?
With Tenancy in Common, each buyer will own a separate share of the property. The percentage of the house you own doesn’t have to be equal. For example, if two of you are buying the house, you could each own 50% or one of you could own 75% and the other 25%. No matter how much of the property you each own, all your names will be on the title deed.
Remember: in Scotland, Tenants in Common is known as Joint Owners.
Another thing to note about Tenancy in Common is that you can add new tenants, and redistribute the share of the property at any time. The title deed can be amended to write in the new tenants and establish the shares.
Who is Tenancy in Common suitable for?
Because your house is divided up between owners, this type of ownership is generally preferred by people buying with friends or family members. This is because you get to buy together but the separation also allows you to have some legal and financial independence from the other parties if you want to move on later down the line.
However, if you’re buying as a married or unmarried couple, there’s no rule against using this type of ownership if that type of ‘ownership separation’ is something you would desire from your partner.
What kind of mortgage do you need?
Though it is technically possible for each owner to take out their own individual mortgage on their property, most lenders will expect, and no doubt ask you to instead take out a joint mortgage, so you should expect to go down this route. With a joint mortgage you’ll all be responsible for paying towards the deposit and the repayments.
Up to 4 people can apply for a joint mortgage. When deciding how much to lend, mortgage lenders will usually look at the income of the two highest earning people on the application.
The financial history of each person in the joint mortgage will affect everyone else in the mortgage, including each other’s credit scores. So, it’s really important that you do the necessary checks
before applying for the mortgage. If one of you falls into financial trouble and can’t make the repayments, the rest of you will have to make up the loss.
As always, we’d recommend hiring a mortgage broker
who can use their expertise to help you navigate the application process for your joint mortgage.
How does Joint Tenancy affect selling and wills?
As the ownership is divided up into shares, the rules on selling Tenancy in Common depend on how much of the property you want to sell. If you simply want to sell your percentage of the house, you are free to do so to whomever you please. However, we would recommend that you always consult with the other owners before selling.
If you want to sell the entire property, all the owners must agree to the sale – and no-one can be forced to agree. The only way you can sell or get someone to leave the property without agreeing is if your circumstances allowed you to get a court order.
Remember: if you were to pass away, your share of the property won’t necessarily go to one of the other owners. You can choose to leave your share to whomever you like in your will
Can you change to a different kind of ownership?
If you want to change your ownership to Joint Tenancy
, in which each of you share 100% ownership of the house, you’ll need to complete a Deed of Trust agreeing to all become Joint Tenants. You may have already had a Deed of Trust; in this case, you’ll just need to amend it (you can use the help of a solicitor).
It may be the case that you title deeds have restrictions on selling the property that you will need to cancel before you can change to Joint Tenancy. You can do this using an RX3 form
You should get a legal professional to help you to fill out these forms before sending them off to HM Land Registry.
However, in Scotland, the process is slightly different. You’ll need to get a solicitor to help you change the title deeds on the property to make you ‘joint owners with a survivorship clause’.