If a property is purchased in more than one name then curiously the owners are also tenants.
Mortgages are usually arranged in either one or two names, but under the Law of Property Act in 1925, a property can have up to four legal owners. Most lenders will not accept a mortgage application in more than two names and anyway, their systems could not cope with more than 2 applicants.
If there are to be more than two applicants it is most important to check the lender’s affordability rules and how many incomes they will consider.
If a property is purchased in more than one name then curiously the owners are also tenants. There are two types of tenant:
Joint Tenants. This is the default and most common position where all the owners each own 100% of the property. It becomes important when the property is sold and the cheque representing the net proceeds is made payable to all the owners / tenants who will require a joint bank account to process the funds. It is also very important should one of the owners / tenants die because the property value can have a marked effect on the estate value and any inheritance tax liability. In the event that one person dies, the property is automatically and immediately transferred to the survivor(s) without inheritance tax being due. Any clause in the Deceased’s will leaving the property to a third party will not be effective if the property is a Joint Tenancy.
I have not considered bankruptcy but your comments are invited on that aspect of Joint Tenancies.
Tenants in Common. There seem to be two main reasons for a Tenant in Common arrangement (where each person owns an agreed percentage of the property). The first is where a couple purchase a property and have different deposit amounts to put into the purchase. If they split up the person with the larger deposit (which often comes from the Bank of Mum and Dad) will want their money back, not just a straight 50% of the proceeds. The shares are often set at 50 / 50 but can be as far apart as 99 / 1, especially in buy to let cases where assets and income are required to be equalized.
The other situation is where people are worried about possible future care costs and do not wish to see their entire estate taken by the authorities to pay the care home costs. Great care must be taken by all those involved in the purchase to avoid a claim of deprivation.
If anybody is a Tenant in Common it is essential that they make a will giving instructions for the disposal of their share of the property. Without a will there are going to be tears.
Whatever the legal ownership of any property if there is more than one owner the lender will consider them all to be jointly and severally liable for the mortgage, so running off with the next door neighbour does not release anybody from their mortgage obligations!
And lastly – it is of course possible and quite easy to change from Joint Tenants to Tenants in Common and vice versa. There will be some costs but the process is not difficult.
Where a property is owned as Tenants in Common there is a Form A Restriction added to the Title Register for all to see. It will cost you three pounds to look but the results are instant as long as you only use the gov.uk website at https://www.gov.uk/government/organisations/land-registry
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