Joint Tenancy vs Tenancy in Common

Prospective property buyers in England and Wales — particularly those coming from outside the UK — may be surprised to learn that there are multiple ways that ownership of property can be shared under English law.

Understanding the two principal ways by which ownership of property can be shared — namely, whether by way of joint tenancy or by way of a tenancy in common — requires a basic appreciation of the difference between legal and equitable interests in property.

Legal vs Equitable Interests in Property: A Brief Overview

When land is acquired or transferred in England and Wales — whether by a single or multiple buyers — the buyers may acquire both legal and equitable interests over the property. The difference between these two types of interests can be briefly summarised as follows:

• Legal Interest: refers to the formal, registered title of the property at HM Land Registry.

Generally speaking (and subject to any separate equitable interests), holders of the legal interest in a property will have the right to possession of the property (i.e., to control and occupy the property); the right to transfer (sell, lease or mortgage) the property; and the right to bring actions in respect of land torts (e.g., trespass, nuisance).

A legal interest in property can only be held jointly (more on what that entails below) and by a maximum of four people.

• Equitable Interest: confers the right to a beneficial interest over the property – that is, the right to benefit from the property’s value and how it is shared.

Subject to the terms of the trust or agreement, holders of an equitable interest over a property will have the right to a share of any proceeds generated by a sale of the property; the right to income generated through rent of the property; the right (in some cases) to occupy the property; and the right to bring actions in court to protect or enforce their rights to the property.

An equitable interest can be held jointly or in common (again, more on that below) by an unlimited number of people. Under more complex ownership structures, an equitable interest may be held both jointly and in common by different tenants.

Joint Tenancy: Equal, Indivisible Ownership and the Right of Survivorship

Under a joint tenancy, all co-owners hold an equal, undivided share of the property, of which no single owner can claim a distinct portion.

Since all the joint tenants collectively hold the entirety of the interest, they must act together if they wish to sell or transfer their collective interest in the property.

Where the tenants cannot agree as to whether or not they should sell or transfer their collective interest, it may be possible to sever the joint interest to create a tenancy in common. Note however, that a severance is only possible in respect of the equitable interest – since the legal interest can only be held jointly, it cannot be severed.

A joint tenancy is distinguished by the “right of survivorship” – where one of the joint tenants dies, their interest in the property, being indivisible from that of the other tenants, automatically passes to the remaining tenants. For this reason, joint tenancy is often (though not always) the preferred form of co-ownership between spouses.

Both the legal and equitable interests in a property can be held jointly. When two (or more) people register their legal interest in a property, the default assumption (in the absence of any arrangement to the contrary) is that the equitable interest will also be held jointly.

Tenancy in Common: Defined Shares in the Beneficial Interest

Under a tenancy in common, each owner holds a specific, divided, proportional interest in the property. The interest can be divided between the tenants in any number of ways, so long as the total of these fractional interests adds up to the entirety (100%) of the interest in the property.

It is worth noting that only the equitable interest in a property can be held by way of a tenancy in common – as stated above, the legal interest in a property can only be held jointly.

Unlike in a joint tenancy, each tenant in common is free to sell or transfer their equitable interest in the property without needing the consent of the other tenants. For this reason, holding the interest in common may be preferred where the tenants have contributed unequally to the purchase price of the property, or wish to eventually transfer their share to someone outside the ownership group.

Crucially, the right of survivorship does not apply to a tenancy in common. When a tenant in common dies, their individual share will pass to their heirs or beneficiaries in accordance with the provisions of their will or (where the tenant dies intestate) under the intestacy rules.

Joint Tenancy vs Tenancy in Common: A Summary of Key Differences

In Conclusion: A Disclaimer

This article provides a very general overview of shared ownership under the law of England and Wales, focusing on the difference between legal and equitable interests, and the distinction between joint tenancy and tenancy in common.  It is by no means intended to be an exhaustive explanation and does not constitute legal advice.

Due to the particular nature of shared ownership of property in England and Wales, specialist advice may be required to navigate complex co-ownership arrangements.

The legal professionals at B&M Law LLP have extensive experience in advising on shared ownership structures and can assist with establishing or adjusting ownership rights by providing specialist advice.