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What Does Tenants In Common Mean In A Will?

There are two ways you can jointly own property in the UK. As joint tenants and as tenants in common. But what does tenants in common mean in a will?

Are there disadvantages or advantages of being tenants in common as opposed to joint tenants? What are the problems for the person inheriting the other person’s share of the will if they want to sell?

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Let’s take a look:

What Are The Differences Netween Joint Tenants And Tenants In Common?

Joint tenants and tenants in common sound very similar, but they mean very different things for how property is jointly owned and what it means in a will.

The key differences between joint tenants and tenants in common are:

Joint Tenants

Joint tenants own the whole property together equally. It can be thought of as a 50-50 split.

This has some advantages. For one, it’s simple. There’s no need to decide who owns how much of what, as there can be when owning property as tenants in common.

For these reasons, choosing to own property as joint tenants is something that’s often done by couples just starting out on their life together. The thought that something might go wrong in the future seems very far away.

When a joint tenant dies, the situation is simpler too. However, it’s also more limited in terms of choice. The surviving tenant will automatically inherit the entire property that they once shared ownership of.

What’s known as the “Right of Survivorship” means that usually not even a joint tenant’s wishes expressed in their will can overwrite the automatic inheriting of full ownership by the surviving joint tenant.

Tenants In Common

Tenants in common can specify how much of a property they each own. They own only those specific shares. This might also be a 50-50 split. Or it can be different so that it reflects divergent levels of income or deposit contributed by the individual tenants.

There are many advantages to this. Flexibility and the sense of fairness that it can create between tenants are high among them.

That said, it’s also a more complex arrangement to set up than joint tenants. Of course, any property ownership agreement should be drawn up with expert legal advice on hand. Yet becoming tenants in common will require this expertise even more than other arrangements because of the potential complexity.

The other difference between being tenants in common and being joint tenants is what it means in a will. Because the shares of a property owned by a tenant in common can be distributed as part of their will.

In a way, this can be seen as more beneficial flexibility. Yet it also has the potential to create disputes.

The Potential For Will Disputes Created By Tenants In Common

Being tenants in common can cause problems for the person inheriting the other person’s share of the will. Especially when they want to sell.

For example, you can easily picture a scenario where a married couple buy a property as tenants in common. When one sadly passes away, their will stipulates that a child from a previous marriage should inherit their share.

This child has inherited a share of a property, which can be good for them. Yet they are unlikely to want to live in the property with their parent’s former partner. When this happens, there are usually three options. These are:

They buy you out
You buy them out
You both agree to sell the property

These sound like they should be clear and obvious solutions. Yet there is a large potential for disagreement as to the favoured course of action.

You might want to sell the property. They might want to keep it, but not be able to afford to buy you out. In these circumstances, it’s wise to seek professional legal advice from a solicitor as to how to proceed.

What Does Tenants In Common Mean In A Will?

For a will, tenants in common means that the owners of the property in question can choose what happens to their share after they die.

If they choose the other tenant as their beneficiary, there isn’t a problem. However, if someone little known or of differing mind on the favoured solution as to what to do with the property inherits their share, there is potential for disagreement.

This makes it important to be open and honest about the arrangements made in the wills of any tenants in common if at all possible. Because what it means for the surviving tenant and the beneficiaries can be the difference between a happy and an argumentative future.

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What Are The Disadvantages Of Tenants In Common?

Tenants in common is one of the ways that many people in the UK choose to buy property together. It’s often perceived to be a better solution than being joint tenants, but it’s not perfect. So, what are the disadvantages of tenants in common?

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Let’s take a look at this popular method of joint property ownership and see why you might or might not want to choose another method:

What is the difference between joint tenants and tenants in common?

“Joint tenants” or “tenants in common” are the two ways that you can own property with another person or other people in most of the UK (Scotland has its own slightly different system).

The easiest way to think about these two very similar-sounding terms is this:

Joint tenants own it all together – this common choice for couples entering a relationship together means you both own the entire property.
Tenants in common own individual shares – this popular choice for couples, partners, and even close friends and family members buying together clearly sets out (usually as percentages) who owns how much of a property.

What are the disadvantages of tenants in common?

There are some situations where owning property as tenants in common makes a lot of sense. This is especially true if the people who want to become owners of a property are not married or tied together in a similarly close way.

However, there are also many reasons why being tenants in common might not be the best choice for you:

1) Joint Tenancy Is Simpler

As tenants in common, you can set out precise percentages and even further details of who owns how much of a property. In some situations, this can be a big advantage.

For example, picture a couple who want to buy a home together but have very different incomes. Perhaps one has a better income but one has large savings. In this instance, as tenants in common, they can decide what is fair between them. If the situation changes, as tenants in common, that couple can also alter the details of their split.

This is all very flexible. But it’s not always very simple. As joint tenants though, you instead own the entire property together. You don’t need to work out what a fair percentage is or change it later on. You both own the property together.

As joint tenants, were the relationship to end before one of you passed away, you still have options. You could sell your share to the other person, have them buy you out, or you might both move out and sell the property to gain 50% of the sale price each.

In summary, for all the precise definition and potentially increased fairness that tenants in common offers property ownership, it also carries a certain weight in terms of complexity.

2) The Will Defines What Happens When A Tenant In Common Dies

One of the advantages of tenants in common is usually held to be that you can decide what happens to your share of the property when you pass away.

You can’t do this as a joint tenant. As a joint tenant, the surviving tenant would inherit full ownership of the property because of something called the “Right of Survivorship”.

That said, the fact that tenants in common can choose what happens to their share of the property by laying it out in their will isn’t always a benefit. It’s easy to picture why this might be.

For instance, imagine a happily married couple who are tenants in common. When one of them passes away unexpectedly, their will says that their share of the property should pass to a child from a previous marriage. This child might be a virtual stranger to the surviving partner.

In circumstances like these, a large potential for family disputes is created by being tenants in common. The solution is usually to draw up your will in consultation with a specialist will solicitor who can talk you through these challenges. You should also make sure your tenants in common do the same.

Changing From Joint Tenants To Tenants In Common

As people’s lives and circumstances change, it’s not uncommon for them to want to change the method through which they own property. Most legal experts will tell you that regularly reviewing the way you hold property – or at the very least thinking about it every now and again – is a very good idea.

As a freshly married couple, becoming joint tenants of a property might feel natural and affirming. Later, situations can change. Changing how you own property to reflect that can offer more protection. However, it’s important to understand the advantages and the disadvantages of becoming tenants in common before you make alterations.

Want To Talk Your Situation Over With An Expert Before You Decide?

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Can A Company Buy A House For A Director?

Can a company buy a house for a director?

If you’re investigating whether a company can buy a house for a director, your best recourse will always be to consult a legal professional first.

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That said, here is a thorough grounding in the basic situation when it comes to companies buying residential property for their directors and employees:

Can A Company Buy A House For A Director?

Yes, a company can buy a house for one of its directors. However, the process of doing so – and, critically, the associated tax implications – are by no means simple or beneficial.

This isn’t an accident. The idea that a director or shareholders in a firm could buy personal property to avoid paying tax is not a new one. This means the law is set up to prevent it and penalise people and companies who do.

The key determinant of whether this will be a beneficial idea or not is often whether the purchase will attract what is called a “Benefit In Kind” (BIK). This is a situation where a director is receiving a benefit from the house, such as:

Living in the accommodation themselves
Having their family or dependents living in the property
Letting any non-qualifying person (anyone with a familial connection to the company) occupy the property

Companies Buying Residential Properties And Tax

The goal of most people who are interested in whether companies can buy a house for one of their directors is the possibility of paying some degree of reduced tax by doing so.

The difference is usually between paying corporation tax (19% at time of writing) or a combination of Income Tax, Capital Gains Tax, and National Insurance Contributions (which can be much more).

The theory often imagined is that because a company is a separate legal identity from its owners, the property will be owned by the company and any rental income will be taxed at the corporate tax rate instead of the often higher Income Tax rate.

Unfortunately for those with this idea in mind, the reality is that this is rarely an advantage to a director living in the property. They are deriving a Benefit In Kind in the form of accommodation. The only exception would be if the director derived no benefit. For example, if the company rented the property to them at a fair market rate.

There are also additional tax rules for companies buying residential properties over £500 000 in value:

1) Stamp Duty Land Tax (SDLT)

If a person with a connection to someone who is part of the company (these are those non-qualifying people mentioned previously) lives in the property in the three years after purchase it will be subject to a special rate of SDLT.
This is charged at 15% of the property price when it is purchased. Even if the person living in the property is intending to pay a fair rent (as established by the local market), this cannot be avoided.

Any company in the UK that’s purchasing residential property is likely to need to pay this higher rate. This remains true even if the company is intending to develop the property and sell it on for a profit.

2) Annual Tax on Enveloped Dwellings (ATED)

SDLT is a barrier for the first three years after a property has been purchased by a company. Annual Tax on Enveloped Dwellings, on the other hand, remains in effect throughout the time that a property is owned. ATED is:

Charged annually and in advance – this tax is levied every year and is paid a year in advance.
Based on property value – this means it runs to several thousand pounds every year.
Penalised harshly if not complied with – the fines for not paying ATED are significant and not to be risked.

How Else Could A Company Buy A House For A Director?

There are some other slightly more indirect options for a director who wants to explore their options when it comes to having their company buy a house for them. These include:

Have the company loan them money – a company can lend money to a director. They can then do as they please with it. This would only attract a BIK if the director was paying less than a fair market rate of interest on the loan. Some companies do have articles of incorporation that prevent this though.
Have the company pay dividends – a company can give the director a dividend payout. The director could then use this to purchase the property.
Carry out a share buy-back – this option has received a great deal of negative press but remains an option for directors who are also shareholders. The company can buy out the director’s shares, giving them funds. However, Capital Gains Tax may be payable.

This is not to say that any of these options are sensible ideas in any particular case or that they will be beneficial – or even legal – depending on individual arrangements. That’s why it’s always vital to seek out expert legal advice whenever you are wondering whether a company can buy a house for a director.

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Can You Pull Out Of A House Sale In The UK?

More than 1 in 4 house sales in England and Wales fall through every single year. This can be for a huge number of reasons. But are there consequences? When can you pull out of a house sale in the UK?

In short, even after contracts have been exchanged, it is technically possible to pull out of a house sale or purchase. The financial and legal costs of doing so simply grow the nearer to the actual sale you get.

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Here is everything you need to know about pulling out of a house sale or purchase in the UK:

When Can You Pull Out Of A House Sale?

You can pull out of a house sale effectively at any stage – right up until the day contracts are due to be exchanged – without any additional penalty.

It is actually still possible to pull out of a sale after contracts have been exchanged. However, the complications and consequences do grow significantly after that point.

(It’s worth noting that laws are slightly different in Scotland. In Scotland, you can only pull out of a house sale before the phase known as the conclusion of missives.)

Can You Pull Out Of A House Sale After The Offer Accepted Phase?

Yes, even after an offer has been accepted, there are no legal consequences of pulling out of a house sale you are involved in.

There can still be financial costs. But these are more in the nature of sunk costs (that is to say, the money you’ve already spent on the process so far) rather than extras added on top.

In general, it has been estimated that sellers can lose an average of £2700-£5000 when a house sale fails.

Can Buyers Pull Out After The Exchange Of Contracts?

Once contracts have been exchanged, a buyer can still pull out. The legal and financial consequences of doing so though are much more severe:

Forfeit deposit – the seller will almost certainly end the contract, meaning the buyer will forfeit their deposit.
Claim for damages and fees – in some cases, sellers have been able to claim for damages against buyers who pull out of a sale after contracts have been exchanged. For example, if house prices go down in the intervening time. Buyers may also have to pay any other costs the seller incurs.
Funds committed – any costs incurred by the buyer so far are also lost. This might include money spent on conveyancing fees, property surveys, mortgage advice, and so on.
Despite this, there may be unforeseen events that suddenly limit a buyer’s ability to make the purchase. Or perhaps new information comes to light regarding the condition of the property.

What Happens If You Pull Out Of A Sale Of A House?

If you pull out of a house sale as the seller, depending on the contract you signed, you will probably have to pay:

Estate agent fees – many estate agents expect to be paid for finding a buyer willing to pay the price you want. If you later decide not to go ahead, as far as they are concerned, they have still done their job and expect to be paid for it.
Conveyancing fees – the same is true of any conveyancing solicitors and other fees associated with the conveyancing process. Even with solicitors who don’t charge you a fee if there is no sale, there may still be the cost of disbursements that can’t be recovered.
Valuation fees – valuing a house before sale tends to cost money and cannot be recovered if you change your mind even for a very important reason.

This makes checking the contract to see what fees you have agreed to pay a vital preliminary step before choosing to walk away from the sale of a house. It’s also important to take stock of the costs you have already paid and how they stack up against the negatives of making the sale.

The party who is not pulling out of the sale can also issue a “Notice to Complete”. This is essentially a ten-day countdown to go through with the sale during which the other party may have to pay interest.

What Can You Do If Your House Buyer Pulls Out Before Exchange?

From a legal standpoint, if you haven’t exchanged contracts, there is not much you can do if your buyer pulls out from a house purchase. In England and Wales, even an acceptance of an offer is not legally binding.

This does depend on the reason why your house buyer pulled out. One of the main reasons house sales fall through – and indeed one of the problems with how house sales in the UK work in general – is that you agree a sale price first and carry out surveys and other due diligence after.

(In Scotland, the law is slightly different. Far fewer house sales fall through in Scotland – in large part, because sellers must have a “home damage report” survey completed before they put their property on the market.)

In cases where due diligence reveals problems, you might be able to address any work the property requires in order to persuade the buyer not to give up on the sale. Or you might agree to a reduction in the asking price to reflect that information.

In general though, the best approach is always to talk with your conveyancing solicitor and any other legal experts involved in the process before you decide whether you can pull out of a house sale or what to do if someone pulls out on yours.

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How Much Is A Right Of Way Worth?

There is no fixed system for calculating the value of a right of way in the UK. So, how much is a right of way worth really?

The short answer is a right of way is worth whatever someone is willing to pay for it. Or as little as someone is willing to sell it for.

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If you want to work out a fair price for a right of way you own and want to sell – or one you need and want to acquire – here are a few things to bear in mind:

What Is A Right Of Way?

A right of way (sometimes called an “easement”, though technically it is a type of easement) is a legal agreement that allows people – this could be one specific person, a group, or the general public – access to a piece of land owned by someone else.

This is usually done for a specific purpose. It could be for access to a landlocked property, to allow a water company access to pipes, or to let the general public walk, bike, hike, or drive across the owner’s land.

How Long Does A Right Of Way Last?

A right of way is most commonly created between landowners. Perhaps Landowner A needs to be able to reach outbuildings on their land and Landowner B is happy for them to drive down a lane on their own land. Perhaps they might charge a fee to allow it.

Once a right of way or easement is in place, it will continue until it is extinguished or released.

Can A Right Of Way Be Sold?

Rights of way can be created – usually in the form of what is called an “Express Grant” created by Deed – and then sold. This normally happens when someone wants to sell part of the land they own but wants to retain some kind of access.

There are also circumstances where someone has bought property that has a right of way going through it. Or where another person has stated an interest to gain access across their land.

In any of these cases, a right of way can indeed be sold.

How Much Is A Right Of Way Worth?

There are no set rules for determining how much any right of way might be worth.

A generous country landowner who is quite happy for hikers to cut across their land might sell a right of way for nothing or very little. A city landowner that has a right of way that sees them disturbed by vehicles passing along an access road to some garages might want significantly more.

In general, the more potential there is for the right of way to be used, the greater its value:

Size – the amount of land covered is the factor that will most affect how much a right of way is worth. The more land the right of way covers, the greater the chances it will be used.
Location – a right of way in an urban area will likely be worth more than a right of way out in the countryside. The more people that might want to use a right of way, the more it could be worth.
Use – a right of way might be a footpath allowing people to walk across a distant corner of a field you own. It could be a service road that passes right by your house. Usually, the more inconvenient it would be for the owner to allow access, the more it is worth.

Is A Right Of Way Beneficial For A Property?

All kinds of easements, including rights of way, may affect property value if they limit your ability to build on a large part of the land. It may also put off potential buyers, as some property professionals will advise they present a potential problem (and they may).

There are also situations where rights of way that have existed for decades – and sometimes longer – have become so much a part of local people’s lives that making changes is an easy way to prevent yourself from making friends in the local area.

Broadly speaking though, only the most restrictive or large-scale easement will have much of an effect on your property value. An easement can also be a valuable asset. This can make it worth working with a property expert and solicitor with experience in right-of-way law to see what yours could be worth.

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