Property held as tenants in common after death

When a deceased person owned a property as tenants in common, the key point is that their share of the property does not pass automatically to the other co-owner or co-owners. This is the fundamental distinction between a tenancy in common and a joint tenancy.

How the share passes:

The deceased's share of the property forms part of their estate. It passes either according to the terms of their will, or if there is no valid will, under the intestacy rules set out in the Administration of Estates Act 1925 as amended.

This means the share could end up being inherited by someone who is not the surviving co-owner. For example, if the deceased left their share to a child, that child becomes a co-owner with the surviving original co-owner.

Establishing the type of ownership:

It is important to check the title at HM Land Registry. If the title includes a restriction stating that the survivor of the proprietors cannot give a valid receipt for capital money, that is a strong indicator of a tenancy in common. A severance notice may also have been recorded.

Where the title is silent, there may be a declaration of trust or other documents that clarify the position. In the absence of clear evidence, the legal presumption for jointly purchased property is a joint tenancy in equity, though this can be rebutted.

Practical consequences:

1. The personal representatives of the deceased (executors or administrators) will need to deal with the deceased's share as part of the estate administration.

2. The surviving co-owner cannot simply sell the whole property alone. Any sale requires cooperation between the surviving co-owner and the personal representatives, or a court order.

3. If the beneficiary of the deceased's share wants to realise their inheritance and the surviving co-owner does not want to sell, the beneficiary (or the personal representatives on their behalf) can apply to the court under section 14 of the Trusts of Land and Appointment of Trustees Act 1996 for an order for sale. The court will consider various factors including the purposes for which the property is held, the welfare of any minor who occupies it, and the interests of any secured creditor.

4. The share does not have to be equal. Co-owners as tenants in common can hold in unequal shares, for example 60/40 or 70/30. The proportions should be set out in a declaration of trust. If they are not clearly documented, this can become a source of dispute and may require the court to determine the shares based on the parties' contributions and intentions.

Inheritance tax and other considerations:

The deceased's share of the property is included in their estate for inheritance tax purposes. If the share passes to a spouse or civil partner, the spouse exemption applies and no inheritance tax is due on that share. If it passes to anyone else, it may contribute to an inheritance tax liability depending on the value of the overall estate.

If the deceased and the surviving co-owner were spouses or civil partners, it may have been more tax-efficient for the property to have been held as joint tenants, since the automatic survivorship rule means the share passes outside the estate for probate purposes (though it is still aggregated for inheritance tax). However, holding as tenants in common is a common and deliberate estate planning strategy, for example to preserve the nil rate band by allowing each spouse's share to pass into a discretionary trust on first death, or simply to ensure each party can leave their share to their chosen beneficiaries.

If there is a specific situation you are dealing with, I am happy to go into more detail on any of these points.