What is co-ownership? – Thomas & Thomas Avocats Ltée
In this blog, we’ll explore the intricacies of joint real estate ownership, particularly the difference between “joint tenancy” and “tenants in common,” and how these choices can profoundly affect your ownership experience. Did you know that there are significant legal and financial differences between the two?
How does a co-ownership work?
Land ownership can be shared in two different ways: “co-ownership” and “tenants in common”.
The property can be purchased by any type of couple, such as spouses or business partners. However, when making this purchase it is important that the legal title under which the property is held is clear. Indeed, future eventualities must be taken into account, which will differ depending on the circumstances (for example, whether the co-owners are related personally or professionally).
Co-ownership/co-ownership
“Joint ownership,” also known as “co-ownership,” considers both partners to be the legal owners. However, upon the death of one of the partners, the assets remain the property of the survivor. In effect, the “interest” of the deceased disappears and there is nothing to do other than register the death. Property cannot be inherited by the deceased’s relatives because they still have a living legal owner, this being the co-owner who survived them.
As joint tenants, you have an undivided share of the entire property. Up to four people can own the same property. (you cannot have more than four parties registered in the Land Register).
Joint rental
“Tenancy in common” considers the property to be shared among its owners in separate percentages called shares. These shares do not have to be equal, meaning one party may have a much higher share than the other. Since each party is only legally entitled to their own percentage, this share will be inherited by the next of kin. Thus, the surviving co-owner of the property will not obtain this share by default.
For “Tenants in Common”, it is wise and sometimes necessary to document the precise agreement between the owners. This agreement is best recorded in a formal trust deed.
Joint ownership and common tenants
The ideal form of “shared ownership” depends on the situation of the co-owner and their individual interests.
“Joint ownership” has the advantage of being practical and simple, leaving minimal paperwork in the event of death when it comes to determining who now owns the property. “Joint ownership” may be preferable if an owner does not want their share to be inherited by their next of kin and prefers the property to remain with their co-owner. This is often why married couples are in “joint tenancy,” so that ownership remains within the marriage under the law.
“Tenancy in common” is generally recommended by lawyers because it gives each co-owner more freedom regarding their share. When property is shared unequally, for example, the party who owns the larger share may not want all of the property to go to their co-owner. This is often the case in circumstances such as unmarried couples and business partners, where events can change. For example, a co-owner of a business building may want his share to go to his family rather than to his partner.
What happens if a co-owner dies?
In the event of the death of a co-owner, the use of “Tenants in Common” is recommended if they do not want their share to automatically revert to their co-owner. A remarried parent may wish to leave their share to the children of their previous marriage and not to their new spouse.
“Tenants in common” can also reduce potential inheritance liabilities, as one party will have greater autonomy over what would be inherited by their next of kin and, therefore, greater control over inheritance taxes which resulting.
Overall, a good rule of thumb for choosing “tenants in common” is when co-owners will make unequal contributions to the property, or there is no positive reason to consider “joint ownership.”
Thomas and Thomas Solicitors understand that buying or selling a property can be one of the biggest financial commitments you will make in your lifetime, and we are here to ensure the process goes smoothly. Our lawyers will guide you every step of the way.
