Tenants in Common - Idiot's Guide needed

sarah_elton

OH and I are planning to buy together at some point (probably late next year). We're not married. He'll be putting down virtually all the deposit (fairly sizeable). I believe that to have an agreement for how equity is split in the event of us going our separate ways, we need to own as tenants in common.

I need some basic info on this as I have some queries:

1) How are these most commonly written? Supposing for instance, plucking simple numbers from the air, that we bought a house for £100k and he put down £50k, and we share the mortgage payments equally. Would the agreement say that in the event of sale he gets £50k then the rest is split, or that he gets 75% and I get 25%? I'm trying to get my head round the maths of it all. Without putting too much thought in, 75%/25% seems fairer to him if the value of the property rises.

2) I've read that some couples are changing their houses from joint ownership to tenant in common to dodge inheritance tax. However, what I've read says that with joint ownership, if one person dies, the house passes to the other. I guess this isn't the case with tenants in common. If (god forbid), something happened to him (or me), does that mean the other would have to buy out their share of the house? If we have tenants in common, and want the other to have the house in the event of death, would we need to ensure we both had wills stipulating that the half a house gets left to the other?

Are there any other considerations/implications of tenant in common ownership to be aware of?

simpywimpy

Tenants in common will mean you each own 50%, regardless of how much deposit has been put down from one side or the other. If you want to be fairer you could get the solicitor to put something in writing about who should get what.

TIC would mean if one dies, the other doesn't automatically get their half so presuming you weren't married or had children, the share would go to his next of kin (parents or siblings). A will would solve this problem though.

My parents changed to TIC for inheritance purposes. Now my mum has died, Her half is mine and dad still owns his half. This was before the new inheritance rules for married couples though so was really irrelevant in the end. Each of them left their half to me instead of each other.

sarah_elton

I thought that if you wanted an agreement on having an uneven split of the equity, you had to own as tenants in common.

Is it possible then to write an uneven equity contract while owning as normal joint owners?

Incisor

simpywimpy wrote: »

Tenants in common will mean you each own 50%, regardless of how much deposit has been put down from one side or the other. If you want to be fairer you could get the solicitor to put something in writing about who should get what.

TIC would mean if one dies, the other doesn't automatically get their half so presuming you weren't married or had children, the share would go to his next of kin (parents or siblings). A will would solve this problem though.

My parents changed to TIC for inheritance purposes. Now my mum has died, Her half is mine and dad still owns his half. This was before the new inheritance rules for married couples though so was really irrelevant in the end. Each of them left their half to me instead of each other.

TIC means that each owns whatever percentage is agreed at the outset. 50% only comes into it if that is what is agreed.

Richard_Webster

If you are joint tenants the property passes to the survivor on death regardless of what is in any will.

If tenants in common it forms part of the deceased's estate and will be dealt with in accordance with their will or under the intestacy rules.

If you want to have uneven shares you have to be tenants in common.

The Inheritance Tax thing required the couple to be tenants in common as a prelimnary to a will which set up a trust or gave the deceased's share in the hosue to someone other than the deceased's wife/partner. Just being tennts in common would not save the tax.

For married couple there is a double allowance so fiddling around with tennacies in common not so worthwhile.

1) How are these most commonly written? Supposing for instance, plucking simple numbers from the air, that we bought a house for £100k and he put down £50k, and we share the mortgage payments equally. Would the agreement say that in the event of sale he gets £50k then the rest is split, or that he gets 75% and I get 25%? I'm trying to get my head round the maths of it all. Without putting too much thought in, 75%/25% seems fairer to him if the value of the property rises.

Fairest method is to work out exactly what has been put in. He puts in £50K. Say mortgage payments are £300 per month. After 6 months he has put in £50,900 you have put in £900 (total £51,800) so fairest is after paying off mortgage and the costs of the sale the money left over is divided 50900/51800 for him and 900/51800 for you.

If you carry on paying the same mortgage amount for 20 years then you will have paid £72,000 between you for the mortgage so he has paid £50,000 + £36,000 = £86,000 and you £36,000 so he gets 86000/122000 and you get 36000/122000 of the net amount available from the sale.

You can have a trust deed that sets that out and you agree to both sign a a record of the amounts paid say every three months so you have a running total of the payments and the figures can be calculated if necessary.

sarah_elton

Thanks Richard - excellent info as always! Obviously we'll talk with our solicitor when the time comes, but it's good to be thinking about it in advance while we aren't making quick decisions during the buying process.

Last question I think - if we were to get married in the future, I would want the agreement cancelled - I don't agree with any form of pre-nup-esque deal! How easy would it be at that point for a solicitor to cancel the trust deed, and for us to change from being TIC to normal joint tenants?

ema_o

I asked our solicitor this & he said we could just tear up the document, however I think if we do this we would still be joint tenants, just we would own the property 50 / 50 rather than me having a larger share.
I'm not sure whether we'd want to do this or change to joint tenants if we got married, interested if anyone has advice?!

Richard_Webster

It is fairly easy to change from joint tenants to tenants in common. One of you gives the other a letter desiring to sever the joint tenancy, get the other to sign to say they have had it, and send the letter signed by both of you to the Land Registry who will I insert a tenancy in common restriction preventing the survivor of you form selling.

Other way more difficult (T in C to joint T) but you just make wills leaving everything to each other.

By the way, the formula I have suggested is not a common one, and some solicitors might struggle with it. If you wanted me to deal with it you would have to find me as I am not allowed to advertise here. You would have to do some inspired Googling!

sarah_elton

LOL thanks Richard. OH agreed that formula seemed fair if I was happy with it.

We'll have to think about it - once married, I want to be normal joint tenants. Not for any real reason since wills would cover it. Just feels like that's what it should be. If we couldn't change from TIC to JT then that's a bit of a bummer.

petroldave

Richard_Webster wrote: »

Other way more difficult (T in C to joint T) but you just make wills leaving everything to each other.

Please can you explain what I have to do to change from T in C to Joint T.

McKneff

hello sarah, if you want to be joint tennants it also means that (and i dont know how old you are) would mean that should you or your oh dies then the surviving one has the whole house, then they get so ill have to go into a nursing home, council sell house.
My oh and I are tennants in common, each of us own half, property is put into a trust, my oh and DS and DH are trustees, my half or oh half will be entrusted to our children so that if the worst happens the council cannot sell the house because they cannot sell half a house, which is all he (or me) would own.
If you and your oh died in a car accident together who would inherit. if you decide who, then why not entrust a part of your house to them with the proviso that the surviging spouse stays in the property for life.
Sorry if that sound a bit confusing but see post from Simpywimpy)
Perhaps Richard could explain it better than me.