Increasingly, a large proportion of a family’s wealth lies in the family home. Most people, however, seem to be unaware of the way in which they own their home or the implications of whatever method of ownership they have chosen. In fact, many of my clients do not remember even having a choice in the matter.
Explaining joint tenancy is not that easy but what I usually tell my clients is that each joint tenant effectively owns 100% of the property, and each of their ownership interests overlap with the other. Joint tenancies carry with them a right of survivorship, meaning that on one joint owner’s death their 100% ownership interest disappears, leaving only the survivor’s 100% interest intact.
Most of my clients are surprised to learn that they cannot bequeath their interest in their home in their Will, if that home is owned as joint tenants with someone else (usually their spouse). A joint tenancy property will automatically pass to the surviving owner, outside of probate and regardless of any provisions under a Will. To avoid this scenario, a joint tenancy must be severed, and the property’s beneficial ownership be converted to a tenancy in common.
Unlike a joint tenancy, a tenancy in common allows the joint owners of a property to have distinct identifiable shares in the property and allows each of them to bequeath their respective shares to whomever they choose in their Will. The right of survivorship no longer applies.
Also, unlike a joint tenancy, a tenancy in common must be purposefully set up by the parties - it is not a default method of property ownership in England and Wales. At the time of purchasing the property, the parties can enter into a Deed of Trust, recording their beneficial shares. This is more usual if they are not going to have half each - for example, if one person has contributed a lot more to the purchase price - but can also formally record a tenancy in common in equal shares, if this is what the parties wish to do. At any time after purchase, the parties can formally sever a joint tenancy by way of an appropriate severance document sent to the Land Registry.
As a matrimonial lawyer I frequently encounter situations where my client owns property as joint tenants with their spouse but wishes to sever that joint tenancy given their impending separation from their spouse so that they each have a distinct, identifiable share.
The potential benefit of this is, of course, that each party can Will their respective share in the property to someone else, usually their children. The potential drawback is that my client will not benefit from the right of survivorship in their own right, as seeking to prevent an automatic passing of the entire interest to their ex-spouse will also cut both ways and prevent an automatic passing of the entire interest to them. Another potential drawback is that the parties may not agree to sever joint tenancy. Whilst this is not a requirement, without an agreement each party’s’ distinct shares would default to 50% each, which may not then fit in with their desired outcome in later financial proceedings. However, this does not prevent them seeking more than 50% in their matrimonial proceedings.
Whilst the process of severing a joint tenancy is fairly straightforward, care also needs to be taken to ensure that it is completed fully. A potential pitfall one might come across is where a party owns both a leasehold title and a share of the freehold title. This may occur, for example, where a large house has been split into flats and the owners of the individual flats also own a share of the land. In this instance, it will be important to ensure that the joint tenancy has been severed on both the flat (leasehold title) owned by the separating couple, and on the share of the land (freehold title) owned by the separating couple.
The fact that spouses are separating is not in itself a reason to sever a joint tenancy. Every case will be different, and its circumstances will determine whether or not this is the best course of action.
For help and advice on this topic or related issues, please do not hesitate to contact Julie Cohen on 01727798067 or email Julie.cohen@salaw.com.
