Severance of Joint Tenancy

Experts in severance of joint tenancy, based in Northamptonshire.

If property is owned by more than one person (i.e. jointly) in the United Kingdom, it is most probably owned as “beneficial joint tenants”. This form of ownership is popular in the U.K. and peculiar to it and some Commonwealth countries, but is unknown on most of the European continent for example.

Severance of Joint Tenancy

In real terms it means that the persons in ownership are seen as a partnership, but not as individuals within that partnership. The ownership is defined as “100% each, in their own right”. What that means in reality is that each owner does not own a specific percentage share of ownership, but is seen as part of the partnership, which as a whole, owns the complete amount. The advantage in setting up ownership in this way, is that it is self dispersing on the death of one of the owners – by simply passing the deceased’s “share” to the other in the partnership without the need for a Will, known as inheritance by survivorship. As we are so lazy in the U.K about making Wills, this is often the “soft” option, because it requires no further action at that point.

However, it does have major disadvantages in certain circumstances. For example, because in beneficial joint tenancy there is no defined ownership of percentage shares in the ownership, if a means test for long-term care costs is undertaken because one of the joint tenants in ownership now needs to go in to care, the value of the whole property can be applied to that person.

A married couple who separate and then divorce, may like to consider whether their beneficial joint tenancy is appropriate at that point, given that if one were to die, the property would then pass to the other without further reference to the survivor.

A couple, each with a previous marriage behind them, and children from both relationships, comes together and marries. However, they own their family home as beneficial joint tenants so that on the death of one, the asset passes outright to the other. Where could the entire value of the asset be directed – maybe to that person’s descendants and the deceased’s descendants get nothing.

It is also not possible for those joint owners of property who wish to pass that property in to any sort of Trust, to do so if the property is owned as beneficial joint tenants. The ownership of property must be defined in individual percentage shareholdings to enable it to be encased within a Trust.

The solution to all the above circumstances is to create a different form of joint ownership known as Tenancy in Common. This form of ownership is the ONLY form of joint ownership known and recognised on the European Continent and most of the rest of the world. It defines each person’s ownership by percentage shareholding and thereby creates an individual share of ownership within the partnership of joint ownership.

If the joint owners of a property wish to convert from beneficial joint tenants to tenants in common (as part of a Trust arrangement for example), a Deed of Severance is raised. This directs that all joint owners in the partnership have agreed to sever (or cut) the partnership in favour of individual shares and also that they agree to register the fact with the Land Registry on the title deed. Sometimes this has to be done unilaterally (without one or more of the joint owner’s consent), but most often it is done with the consent of all joint owners.

The registration at Land Registry enters what is known as a restriction of title on the deed and decrees that the property may not be disposed by any sole proprietor – in other words it needs two or more of the proprietors to agree to any disposition.

The other major difference in this form of ownership is that there must be a Will to state where the share of the property is to pass on the death of each individual tenant in common.

This has huge advantages when dealing with families who have come from previous relationships and wish to protect each individual’s share of ownership and ensure it passes back down that individual’s family line. It also ensures that only the share of property attributable to the individual concerned can be considered when calculating any long-term care costs. However, this is usually disregarded as the share cannot be realised for sale at that point.

It also means that those who bring differing amounts of money to a property purchase can have that difference recognised with percentage shareholdings calculated on the financial input of each individual.

If you or anyone you know is looking for more help and guidance regarding severance of joint tenancy, then give us a call for a confidential, no pressure consultation. We are able to visit you in your own home at a time that is most convenient for you.

The Company currently services clients throughout the West Midlands, Warwickshire, Oxfordshire, Northamptonshire, Buckinghamshire, London and the Home Counties.

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