Why does it matter?
Property can be held in two different ways - as joint tenants or tenants in common.
How you hold the property decides how the money or property is split if you ended up selling or in the event of your death.
If one party is putting more into the purchase price than the other, then this can be recorded in a Cohabitation agreement and/or a Declaration of trust.
To learn more about buying a property with a spouse or partner, read Legal interest and beneficial interest in property and Cohabitation.
The key difference between joint tenants and tenants in common is what happens when either owner dies.
Where two people own a property as joint tenants, if one of them dies the other automatically inherits the deceased’s share (ie owns the whole property). As a joint tenant, you cannot give the property to anyone else in your will.
Most married couples buying a property together choose to own the property as joint tenants so that if one dies the other can carry on living at the property.
A joint tenancy will end automatically in several situations including where one party becomes bankrupt.
Either owner can end the joint tenancy without the other owner’s agreement. See below for more information on this.
Tenants in common
Where two people own a property as tenants in common they will own it in equal or unequal shares.
Tenants in common can hold the property in unequal shares to show the contributions made to the purchase price. The agreed proportions are recorded in a legal document.
Most friends buying a house together or unmarried couples hold property as tenants in common.
When a person dies as a tenant in common their share of the property forms part of their estate and will pass under their will. Their family, rather than the co-owner, will inherit their share of the property.
If you buy as tenants in common it is recommended that you make a Will if you do not already have one.
Can you change how you hold the property?
It is possible to change from joint tenants to tenants in common by severing the joint tenancy. This can be done at any time by serving a Notice to sever the joint tenancy. It is possible to change from joint tenants to tenants in common with or without the other owners’ agreement. However, the process differs based on whether both owners consent to the change. For more information, see the government's guidance.
Tenants in common can become joint tenants at a later date by entering into a Declaration of trust. For more information, read Declaration of trust.
What if one of the owners becomes bankrupt?
If you own your home jointly and one of the co-owners is made bankrupt, you may face losing it. Depending on your circumstances, you may be able to stop or delay your home from being sold.
This is also dependent on the amount of interest the bankrupt co-owner has in the property. If the interest is less than £1,000 and doesn’t increase beyond £1,000 within 3 years from the date of bankruptcy, then the home cannot usually be sold.
Where a co-owner has a legal and beneficial interest in the home and refuses to sell the property, the trustee in bankruptcy (ie the person who oversees the bankruptcy case in question) can apply to the court for an order of sale. If the property is sold, only the bankrupt's share of the proceeds of the sale will vest in the estate.
It is at the court’s discretion to order a sale. This decision is based on a balancing act between the interest of the co-owner, and the creditors being kept from recovering their money by enforcing the charging order.
When a court is making such an order they take many factors into consideration. These factors include:
the interests of the bankrupt's creditors
the conduct of the current or former spouse/civil partner in contributing to the bankruptcy, their needs and financial resources, and the needs of any children
all the circumstances of the case other than the needs of the bankrupt.
Delaying the sale
The partner of a bankrupt individual who is living in the home can typically request for the sale of the property to be delayed for up to 12 months from the date of the bankruptcy order. This is to allow the partner to find somewhere else to live.
Stopping the sale
The partner of the bankrupt individual who is living in the home may be able to stop the sale of the property altogether. The sale of the home can usually be stopped because of exceptional circumstances or by the solvent partner purchasing their partner’s share of the house.
The court may delay or stop the sale of the home altogether if they find that there are exceptional circumstances. Such exceptional circumstances include:
having a disabled child and the house having been adapted for their specific needs
being over the age of 70
Buying your partner's share of the home
The sale of the house may be stopped by the other partner purchasing the share of the house belonging to the bankrupt homeowner. Such a share should be bought from the trustees in bankruptcy, for market value minus the costs of the sale if the home was to be sold.
Note that the bankrupt homeowner cannot simply sign over their share in the property in order to avoid the sale of the property. This amounts to a bankruptcy offence and may result in a bankruptcy order being made or imprisonment.