Tenants in Common vs Joint Tenants

Joint tenants own the whole property together, in equal shares, with a right of survivorship. When one joint tenant dies their interest passes automatically to the surviving joint tenants. It does not go into their estate and their will has no say in it.

Tenants in common own distinct shares, and those shares do not have to be equal. One owner can hold 70% and the other 30%. When a tenant in common dies, their share passes under their will, or under the intestacy rules if there is no will.

That single difference is the whole decision. A couple buying a home together usually want survivorship, because they want the survivor to keep the house without waiting on an estate. Two investors, or a second marriage where each has children from the first, usually do not, because survivorship overrides the will.

The tenancy is recorded on the title. It is not a private arrangement between the owners and it is not decided by who paid what.

If one party is putting in the deposit and the other is not, joint tenancy quietly converts that into an equal ownership, because joint tenants hold equal shares by definition.

Tenants in common lets the title reflect what actually happened. Someone contributing 70% of the purchase can hold a 70% share, and their estate keeps that 70% rather than it passing to the other owner on death.

This is also why tenants in common suits parties who are not a couple: siblings buying together, friends splitting a first purchase, an investor going in with a business partner.

It comes with a corresponding cost. There is no survivorship, so on death the share goes through the estate, which takes longer and can be contested.

This is the part most explanations of this topic leave out, and for an investor it is the part that matters.

For capital gains tax purposes, joint tenants are treated as tenants in common owning equal shares. So on a sale, each joint tenant works out a capital gain or loss on their own share, at their own marginal rate, against their own cost base.

One consequence people do not expect: a gain is not taxed on the property, it is taxed on each owner. Two co-owners on different incomes pay different amounts of tax on the same sale of the same house.

The survivorship rule does not disappear at tax time either. Where a joint tenant dies, the surviving joint tenant is treated as acquiring the deceased's interest, and the cost base of that acquired interest is worked out under the rules for inherited assets.

Co-owners must divide rental income and rental expenses according to their legal interest in the property. Tenants in common divide by their recorded shares; joint tenants divide equally.

It does not matter which owner's account the rent lands in, which owner pays the rates, or which owner is on the loan. The split follows the title.

So the common plan of putting the deductions with the higher earner does not work unless the title itself reflects it. If the property is held as joint tenants, the negative gearing benefit is split down the middle whatever the paperwork behind it says.

That is a reason to settle ownership structure before you buy rather than after. Changing it later is a transfer of an interest in land, which can trigger transfer duty and a CGT event even between spouses.

A joint tenancy can be severed and converted to a tenancy in common, and tenants in common can restructure their shares. Neither is a matter of just agreeing between yourselves.

It is dealt with on the title register, and depending on what is being changed it can be a dutiable transaction and a CGT event. Transferring a share to another person means disposing of an interest in property, with the tax consequences that follow.

There is also the lender to consider. Where there is a mortgage, the bank has to agree to any change in ownership, and a restructure can trigger a full reassessment of the loan.

Get the structure right at purchase. It is the cheapest time to make this decision by a wide margin, and it is the point at which your solicitor is already involved.