When a joint tenant dies, the deceased’s share of the property automatically passes to the surviving tenant. Known as Right of Survivorship, there is no need to apply for a Grant of Probate in these circumstances. However, if one owns a share of a property as a tenant in common, if one of the owners dies, their share does not automatically pass to the remaining co-owners. What happens to that share largely depends on whether they left a will or not. Either way, a Grant of Probate for tenants in common will be required in order to administer the estate of the deceased, including their share of the co-owned property.
What do we mean by tenants in common?
Under a tenants in common agreement, each individual person owns a share of the property, but it doesn’t need to be equal shares. How much of a share each person owns could be broken down by who put the most money into the property or, if buying with family, a parent might own 50% of the property but their two children a share of 25% each.
In most cases, when friends are buying a property together or families help their children get on the property ladder, a tenants in common agreement will be used. It is different from a joint tenancy in that each owner is allowed to sell their share of the property or leave their share to anybody in their will. It is also possible for one owner to mortgage their share of the property, but that is rare, principally because most mortgage lenders would be unwilling to lend on this basis.
However, certain clauses that can be written into the agreement can state no owner is allowed to sell without giving the first refusal to the other owners, or they have the option to ‘vet’ any potential new owners. If this clause isn’t in the agreement and an owner decides to sell their share, the remaining co-owners are entitled to file a petition action with the court which asks the court to sell the property via a court order and the proceeds of the sale are distributed equally among all the owners.
The agreement should include who is responsible for paying the mortgage and other bills, although in most cases, a joint account is set up, and each owner pays their share of the outgoings into this account. However, as tenants in common, there are a number of legal rights for each owner:
- The tenant in common owner can’t be forced to leave the property without a court order.
- None of the other tenants in common owners can sell the entire property without every owner’s agreement or court order.
- No additional loans can be taken out against the property without every tenant in common owner’s agreement.
However, it is possible to add owners at a later date and include their names on the property’s title deeds.
Grant of Probate for tenants in common
So, let’s look at it in more detail. Firstly, let’s give you some examples of situations where a property is owned by tenants in common.
- Parents and their children – often, parents help their children get on the property ladder by investing in a property with them and will own the property together with a tenants in common agreement.
- Business partners – a tenants in common arrangement works well if either business partner wishes to pass on their share in the property to a family member, such as their spouse and/or children.
- Co-habitees – couples living together may want to protect their share of the property should the relationship not continue or if they want to leave their share of the property to someone other than their co-habitee on their death.
- Married couples with children from a previous relationship – to ensure children from a previous relationship don’t miss out on any inheritance, a tenants in common agreement is put in place so that each co-owner can leave their share of the property to their own children. However, in this situation, it is a good idea to ensure the new spouse has the right to live in the property until their death, i.e. a life interest.
When a property is owned by a tenants in common agreement, there are two situations when a co-owner of a property dies; they either left their share to another party in their will, or they didn’t leave a will and therefore the Rules of Intestacy with regards to inheritance applies. The one point to remember is that with tenants in common, a co-owner’s share of the property does not automatically pass to the other co-owners because there is no Right of Survivorship with this type of ownership.
If the deceased made a will, it is highly likely they will have stated who inherits their share of the property. In some cases, they may have made another co-owner a beneficiary or even named all other co-owners to receive an equal share. Alternatively, they may have left their share to a family member or another beneficiary.
If they didn’t make a will, the Rules of Intestacy are applied, and their share of the property will pass to the deceased’s nearest living relatives. If there are no living relatives to receive the inheritance, it will pass to the Crown.
Whether there is a will or not, either the executors, if there is a will or a close family member will be required to apply for a Grant of Probate. This is because it is highly likely that the value of their share of the property will exceed the £10,000 limit of probate not being required.
Declaration of Trust
In many tenants in common situations, it is advisable to get a Declaration of Trust drawn up, which details what share of the property each owner has. This document should also list who pays for what in terms of outgoings, such as bills, mortgage and maintenance. It can also be used should a co-owner decide to sell their share of the property, whether they can do that with or without the consent of the other owners, or if one of the co-owners wishes to sublet their share. When parents are contributing to the purchase of a property for their children, such as paying the deposit, it is a good way to ensure they get their money back.
At Probates Online, we offer a will writing service or a Complete Estate Service to help you through the probate process and estate administration upon the death of a loved one. If you are looking for advice on inheritance tax, gifts or trusts, or need to apply for Grant of Probate, Letters of Administration or would like to take advantage of our entire Estate Administration service, visit our website for more information or contact us today.