What Does Tenants in Common Mean?

Tenants in Common meaning

Tenants in Common (TIC) is a legal arrangement that allows two to four individuals to co-own a property or land. Crucially, each owner holds a distinct beneficial share. This means they own a specific portion of the property's value, even if they don't physically divide it.

These shares can be equal or unequal, giving owners flexibility in proportion to their investment or agreement.

Why would you have a Tenancy in Common restriction?

A Tenancy in Common restriction (Form A) registered at the Land Registry protects against relationship breakdowns between co-owners, especially when combined with a will and a Deed of Trust.

It ensures that no single owner can sell or mortgage the entire property without the consent of the others. This protection is particularly important for unmarried couples, friends buying together, or any situation where contributions to the property are unequal.

However, the restriction is most effective when combined with a well-drafted will and, ideally, a Deed of Trust. These legal documents clarify each owner's share, responsibilities, and what happens to the property in various scenarios, such as death or disagreement.

Tenants in Common Unequal Shares

Tenants in Common can hold unequal shares fairly in the property, allowing them to allocate taxable income proportionally. This is used where one joint owner contributed more to the deposit or mortgage payments, or for buy-to-let properties where one owner is in a lower tax bracket.

They can also create a floating Deed of Trust, which automatically adjusts ownership shares based on each party's contributions to the property.

What happens if a Tenant in Common dies?

You can bequeath your share to a named beneficiary in a will so that they can inherit it instead of the other owner.

Registering a Tenants in Common Ownership at the Land Registry protects your share, preventing other owners from disposing of the property without your consent.

• Unmarried couples.
• Friends/family buying together.
• Anyone who intends to invest varying amounts into the property and would like this to be reflected in their share of ownership.
• Married couples or civil partners who would like to leave their share, in their will, to another beneficiary rather than their spouse.

On completion of the conveyancing, your solicitor will register your separate interests at the Land Registry so that this can be used when distributing any proceeds upon sale.

The disadvantages of Tenants in Common

While Tenants in Common offers flexibility, it also presents some potential challenges. The primary risk is that unequal contributions to the property (mortgage payments, renovations, etc.) can complicate ownership.

For example, if one owner consistently pays a larger share of the mortgage, their equity stake should ideally reflect that. Without a clear agreement, disputes can arise about how those contributions translate into ownership percentages, especially if one owner wants to sell.

Without a Floating Deed of Trust, their equity stake won't account for their larger contributions and could lead to disputes over ownership percentages.

Similarly, if one owner funds significant improvements to the property, they might expect a larger share of the proceeds upon sale. These issues can be easily avoided with a well-drafted Deed of Trust, which clearly outlines each owner's financial obligations and how those contributions will be reflected in their ownership share.

If you're married or in a civil partnership, owning unequal shares, and wish to be taxed proportionally on income from the property (rent, lease, or sale), you must submit a Form 17 Income Tax Declaration. Otherwise, HMRC will assume a 50/50 split.

Tenants in Common rights and liabilities

Each owner has the right to possession of the whole property, meaning they can live in and use the property, as long as it doesn't infringe on the other owners' equal rights to do the same.

While they own individual shares, they all share the right to occupy the whole. They also have the right to be involved in decisions regarding the building's management, such as major repairs, renovations, or choosing tenants if the property is rented out.

Without an appropriate deed in place, a joint owner may be left without recourse to claim their share of the mortgage that they've been paying.

Finally, they have the right to enforce their ownership and rights through legal channels, meaning they can take legal action if another owner breaches the agreement or tries to sell the property without consent.

Tenants in common right to occupy

You might think that because TIC own unequal shares, you divvy up the rooms. Despite owning separate and often unequal shares, the tenants still have the right to occupy the whole property.

Some rights and liabilities differ slightly from joint tenancy in several ways:

Tenancy in common mortgage loans

Even if you own unequal shares, all tenants are equally liable for taxes and most lenders will only grant you a joint mortgage, making you equally liable for the debt.

A Deed of Trust outlines how each owner will contribute to both, but if the other owners fail to pay their share, you will be jointly liable to the lender and the tax man.

With an appropriate floating Deed of Trust, if you are forced to cover their shares of these bills, then your share of the equity will be adjusted to reflect this.

Does a mortgage have to be in joint names?

You can technically get a separate mortgage on your share alone if you are able to find a lender who will grant one.

The Form A restriction, which you should have applied at the Land Registry, will prevent another owner from registering a mortgage or second charges on the whole property without your consent (or a court order).

Selling a house as Tenants in Common

You can mutually agree to sell the property, meaning that all proceeds from the sale and any associated costs are divided based on each owner's share.

Most importantly, you each have the right to apply to force a sale. This means that even if an owner doesn't agree to sell, or there's been a relationship breakdown, the other owner(s) can apply to the court to force a sale.

Tenants in Common and death

There are no automatic survivorship rights for Tenants in Common, meaning your share of the property does not pass to the other owner(s). If you die without a will, then your beneficial interest in the property passes onto your estate, which will be distributed according to intestate laws.

If you share a house with your partner as TIC and don't have a will naming them as the sole beneficiary of the property, then your share could pass by intestacy to your closest relative, who may force the sale of the property against your surviving partner's wishes.

The same is true if you are married or civil partners and fail to execute a will naming your chosen beneficiary to inherit your share of the property; your surviving spouse would inherit your share.

If your late partner's share passes on to a third party, they become the new owner of that share. You both have the right to occupy the whole property.

The inheritor will now have the right to either live in the property, sell their share to you or a third party, or they may be able to force the sale of the property.