The Estate - Joint property ownership
You must decide which type of joint ownership you want if you buy, inherit or become a trustee of a property with someone else.
You can own a property as either ‘joint tenants’ or ‘tenants in common’.
The type of ownership affects what you can do with the property if your relationship with a joint owner breaks down, or if one owner dies.
When someone dies, debts are recoverable from any assets or money left by the deceased. This is known as the “Estate”. No-one else has to pay for the debts unless they are already liable under the terms of the original agreement.
A person can be liable e.g. if the debt is in Joint names or if someone has signed as a guarantor.
The Home - Mortgaged house
When you buy a house in Joint names there are two types of ownership status you can have.
As joint tenants (sometimes called ‘beneficial joint tenants’):
- you have equal rights to the whole property
- the property automatically goes to the other owners if you die
- you can’t pass on your ownership of the property in your will
However, it is possible for creditors to apply for an “insolvency Administration Order” (IAO) within five years of the person dying. This forces the court order on the surviving owner to pay the value of the deceased persons equity into the Estate.
If any of the creditors threaten to do this, it might be possible to negotiate paying a smaller amount in the settlement of the debt rather than lose the house. The court will usually decide that the interests of the creditors are the most important, unless there are exceptional circumstances.
Although this is a rare procedure, it makes it very important that the surviving owner negotiates with any creditors to make arrangements to pay the debts. It make prevent the insolvency administration procedure being used by creditors..
Tenants in common
As tenants in common:
- you can own different shares of the property
- the property doesn’t automatically go to the other owners if you die
- you can pass on your share of the property in your will
If you owned the property as ‘tenants in common’ the property has to be formally transferred to the surviving owner. In this case, if there were debts, then the deceased person’s share of the property would be used to settle the Estate debts.
If the property is to be sold, the Probate gives the Personal Representative (PR) the authority to sell it in accordance with the terms of the Will. If the property is registered and the person who died was the sole owner then PR will often either Assent (form AS1) the property to the person(s) who inherits it or Transfer (form TR1) the property to someone else.
If the deceased was a joint owner and the partner is still alive, you would normally just register the death with Land Registry by lodging a form DJP, along with an official copy of the Probate or death certificate.
It will mainly depend on what the deceased owned and what was outlined in the Will for the Estate, as well as what the beneficiaries intend to do with the property.
As part of the due diligence on an Estate it is important to obtain official copies of the registered title from Land Registry and get a valuation of the asset as early as possible in the process. If Liabilities are then identified you can then very quickly confirm if the Estate will remain solvent.
Estatesearch™ provides early indicators of Joint accounts including buy to let and shared ownership mortgages, that can help signpost professionals to check the status of assets and liabilities. To find out about more features then click here.