Change From Tenants in Common to Joint Tenants

People who jointly own property sometimes use a Deed of Trust to change their ownership structure from tenants in common to joint tenants. This is often done when a couple's relationship changes, such as married couples or civil partners who own buy-to-let properties. There are a few reasons why someone might want to make this change:

• One partner is no longer a higher-rate taxpayer.
• Tax laws have changed.
• A couple wants to share their family home equally.

The change in title means that the joint tenants benefit from:

• Joint property ownership: All owners have a shared ownership of the entire property.
• Right of survivorship: If one joint tenant dies, their share automatically passes to the remaining joint tenant(s). This happens regardless of what's stated in their will.

The difference between joint tenants and tenants in common

Before deciding to change your property ownership structure, you should understand the difference between tenants in common and joint tenants (often written as joint tenants vs tenants in common).

Ownership shares

In a tenancy in common, each owner holds a distinct share of the property. These shares can be equal (e.g., 50/50) or unequal (e.g., 70/30). In a joint tenancy, all owners hold equal shares of the entire property; there are no individual shares.

Inheritance

The most significant difference is how property ownership is passed on after death. With tenants in common, an owner's share is passed on according to their will. This means it can go to anyone they choose, not necessarily the other property owners.

With joint tenancy, the "right of survivorship" applies. If one joint tenant dies, their ownership automatically passes to the surviving joint tenant(s), regardless of what their will says.

The sale or other ownership transfers

A tenant in common can sell or transfer their share of the property without needing the consent of the other owners. A joint tenant cannot sell or transfer their share independently; all joint tenants must agree.

Free initial advice on how our deeds can work for you

Arrange a free consultation with one of our experienced conveyancing executives if you are:

• Severing joint tenancy to register as tenants in common, or vice versa.
• Buying with your unmarried partner, to protect your shares in case the relationship breaks down.
• Married or civil partners let a property, and one of you is in a lower tax bracket.
• Buying with friends or family, to protect shares based on initial and ongoing contributions from each party.
• Going to invest money in unequal shares, improvements, or renovations on the property.
• Buying a property with a mortgage, where one or more borrower(s) will not be a legal proprietor.
• Unable to buy the other owner out and want to surrender your share.

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How do you change from tenants in common to joint tenants at the Land Registry?

The process of removing a tenancy in common restriction at the Land Registry is complex, especially if there are already legal documents like a Deed of Trust or a Deed of Assignment. It's strongly recommended to involve a specialist solicitor throughout the process.

Instruct a Specialist Solicitor

Getting specialist help to change the title ownership of your property is important because to change title ownership, you need to remove restrictions and therefore require legal advice to understand the implications of moving forward with the removal.

Complete Land Registry Forms

Your solicitor will handle the completion and submission of the necessary Land Registry forms, which include:

• Form RX3: This form cancels the restriction on the title. You can Download a Form RX3 here.
• Form ST5: This is a statement of truth to cancel a Form A restriction. You can Download a Form ST5 here.

Draft a Deed of Trust

Your solicitor will draft a new Deed of Trust to reflect the agreement to share the beneficial interest as joint tenants.

Send documents to the Land Registry

Your solicitor will submit all the necessary forms and payment to the Land Registry.

(if applicable) Update HMRC

If the property was a rental and the joint owners are married/civil partners and both legal owners, you'll need to inform HMRC with an updated Form 17.

What are the risks of owning the property as joint tenants?

Changing from tenants in common to joint tenants alters how each owner benefits from the property, especially if it's sold or generates rental income.

If one joint owner passed away, as tenants in common, the deceased's share of the property goes to their beneficiaries. However, as joint tenants, the property share goes to the surviving spouse, potentially leaving out inheritance to originally intended beneficiaries.

Additionally, a jointly owned property can be seized unless there's a Deed of Trust in place. If one joint owner goes bankrupt, the trustee in bankruptcy could apply to the court to sever the joint tenancy, turn it into tenants in common, and then claim the bankrupt's share.

For example

Imagine Sarah and Mark own a rental property. As tenants in common, Sarah owns 70% and Mark owns 30% for tax reasons - Sarah pays her 70% at the lower rate of income tax, whilst Mark pays his 30% at the higher rate. They decide to become joint tenants. This means they now each effectively own 50%.

This means that regardless of their income tax bracket, both Sarah and Mark will pay income tax based on their 50% shares, losing their tax efficiency. If they later separate, this 50/50 split could be disadvantageous to Sarah, who originally had a larger share and gave up her beneficial interest. Disputing this in a TOLATA claim later could be difficult.

When should you not change to a joint tenancy?

While joint tenancy offers several advantages, it's not always the best choice. Here are some situations where remaining as tenants in common might be more suitable:

Unequal financial contributions

If one owner has contributed significantly more financially to the property (e.g., a larger deposit), changing to a joint tenancy would mean they effectively give up a portion of their initial investment. Tenants in common allow ownership shares to reflect these unequal contributions.

Complex family situations

In blended families, where each partner has children from previous relationships, joint tenancy can create unintended consequences for inheritance.

If one partner dies, their share would automatically go to the surviving partner, potentially disinheriting their children. Tenants in common allow each partner to specify in their will how their share should be distributed.

Business partnerships

If the property is owned as part of a business partnership, tenants in common are generally preferred. This allows for more flexibility in managing ownership and transferring shares within the business structure.

What tax do you pay when changing ownership?

Changing from tenants in common to joint tenants might incur tax payments. It's important to understand these before making any changes.

Capital Gains Tax (CGT)

When you sell a property, you may have to pay Capital Gains Tax (CGT) on any profit (or 'gain') you make. This gain is calculated by subtracting the original purchase price (plus certain allowable expenses like legal fees and some renovation costs) from the final selling price.

• Tenants in Common: As tenants in common, your CGT liability is based on your individual share of the gain, which is usually proportionate to your ownership percentage. For example, if you own 25% of the property, you'll be liable for CGT on 25% of the gain.
• Joint Tenants: With joint tenancy, the capital gain is typically split equally between the owners. However, each joint tenant is individually responsible for paying the CGT on their share of the gain. This can have significant tax implications depending on your individual income tax bracket. For instance, if one joint tenant is in a higher tax bracket than the other, they will pay more CGT on their share of the gain.

The shift from tenants in common to joint tenants can alter your CGT liability, especially if your ownership shares under tenants in common were unequal.

If you had a larger share as a tenant in common and the gain is now split equally as joint tenants, you may end up paying more CGT than you would have under the previous arrangement. If you had a smaller share as a tenant in common, your CGT liability could decrease.

Example: Let's say you and your partner sell a property for £300,000 that you originally purchased for £200,000. The capital gain is £100,000. As joint tenants, the gain is split equally, meaning each of you has a gain of £50,000. You will each pay CGT on this £50,000, but the actual amount of tax you pay will depend on your individual tax band. If, however, as tenants in common, you owned 75% and your partner owned 25%, the gain would have been split £75,000 and £25,000 respectively. This would have resulted in different CGT liabilities for each owner.

Inheritance Tax (IHT)

With joint tenancy, when one owner dies, their share of the property automatically passes to the surviving joint tenant(s). For IHT purposes, the deceased's share is considered part of their estate.

However, only the increase in value of their share since the original purchase is potentially subject to IHT. The surviving joint tenant already owned a share. It's important to note that if the joint tenants are married or in a civil partnership, the transfer of the property to the surviving spouse or civil partner is usually exempt from IHT.

Rental income tax

If the property is rented out, rental income is typically split equally between joint tenants for tax purposes, regardless of their original ownership shares. There are ways to reduce this by using your partner's taxable income allowance.

If the property is rented out, rental income is typically split between joint tenants. Tenants in common can also agree to split rental income unequally, reflecting their beneficial interests in the property.

This can be a useful tool for tax planning, allowing owners to utilise different tax brackets and allowances to minimise their overall tax liability. For example, if one owner is in a lower tax bracket, allocating a larger share of the rental income to them could reduce the total tax paid.

Important Note: Tax laws can be complex and change frequently. This is a general overview and should not be considered professional tax advice.

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What happens after you instruct? 1 We review the information you sent. 2 You sign and witness the ST5 and RX3 and send it to your solicitor. 3 The solicitor submits the documents to the Land Registry. 4 We email you the updated title - this can take 1 to 6 weeks due to Land Registry backlogs.

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Can you change title ownership without the other owner's consent?

Changing ownership without consent is illegal. Form RX3 warns that providing false or misleading information to gain a benefit or cause loss to another person could be considered fraud under Section 1 of the Fraud Act 2006. This carries a maximum penalty of 10 years imprisonment or an unlimited fine, or both.

Form RX3 states:

"If you dishonestly enter information or make a statement that you know is, or might be, untrue or misleading, and intend by doing so to make a gain for yourself or another person, or to cause loss or the risk of loss to another person, you may commit the offence of fraud under section 1 of the Fraud Act 2006, the maximum penalty for which is 10 years imprisonment or an unlimited fine, or both"

Can you change your own title (without a solicitor)?

It's technically possible to attempt this process yourself, but it's highly discouraged. Even the RX3 form warns that errors could lead to a loss of protection under the Land Registration Act 2002.

RX3 form states:

"Failure to complete this form with proper care may result in a loss of protection under the Land Registration Act 2002 if, as a result, a mistake is made in the register"

It is best to leave changing the beneficial ownership of the property to a qualified solicitor.