Jointly owned property - and who has the benefit

One should also consider exactly who has the equitable ownership – i.e. the benefit of the property.  There are three main scenarios: options A/B/C.

Option A
A typical example involves a husband and wife.  Not only do they hold the legal ownership jointly but they probably also want to hold the benefit jointly.  If one dies, there would be an automatic passing of the benefit to the survivor; the Deceased cannot leave it by Will. The survivor would therefore be in just the same position as if he or she had acquired in sole name at the outset.  This arrangement is called “beneficial joint tenancy”.

Option B
Alternatively, the joint legal owners might want the Deceased’s share of the benefit to pass into his or her estate (rather than an automatic passing to the survivor). The share can be left by Will; if there is no Will, there are statutory rules dealing with intestacy. Option B is often used following a divorce or remarriage or where the joint legal owners are not married.  It allows separate shares in the benefit (not necessarily 50-50), appropriate if one party has contributed more money than the other.  The scheme should be recorded by means of a Trust Deed (without which there is inevitably scope for later arguments or expensive litigation). This arrangement is called “beneficial tenancy in common”.

Option C
Both options A and B involve the joint legal owners together also having the whole benefit of the property.  However, there can be cases where the joint legal owners do not necessarily have any benefit at all.  For instance, unless a club or other association is incorporated as a limited company (which would be a person for these purposes), its property would be held in the names of its trustees as joint legal owners. They would hold it for the benefit of all members for the time being; the trustees themselves might not even be members.

Joint legal owners are deemed to be trustees - even if they have not set up any formal trust and even if they are simply buying a house – on an “implied trust”. By this mechanism, the legal ownership can be considered separately from the benefit. The owners are free to make arrangements that meet their requirements – perhaps in order to minimise Inheritance Tax/Capital Gains Tax or avoid nursing home fees.

It is possible to switch from option A to B.  This is called “severance”.  The party wishing to switch can serve a Notice – under section 36 of the Law of Property Act 1925 - on the other party.  

It is also possible (but much rarer) to switch from option B to A; a formal Deed would be necessary in that case.  

Under options B and C, there are additional requirements to record the position. The requirements differ depending whether the property’s ownership is or is not yet registered at HM Land Registry.  

If ownership is registered at HM Land Registry, appropriate Restrictions should be entered on the Proprietorship Register.  

If ownership is not yet registered, severance is shown by a note or memorandum endorsed on the acquisition deed.

Jeffrey Shaw, Solicitor and Sole Principal at Nether Edge Law