Learning Outcomes
After reading this article, you will be able to distinguish between joint tenancy and tenancy in common, explain how jointly owned property passes outside the estate, and identify the legal and practical consequences for succession and inheritance tax. You will also be able to apply the rules of survivorship and understand the impact of severance and recent legislative changes on the distribution of jointly owned property.
SQE1 Syllabus
For SQE1, you are required to understand how jointly owned property passes on death and when it falls outside the estate for succession and tax purposes. In your revision, focus on:
- the distinction between joint tenancy and tenancy in common
- the operation of the right of survivorship and its effect on succession
- how severance of a joint tenancy affects the passing of property
- the inheritance tax implications of jointly owned property
- the impact of recent legislative changes on intestacy and parental responsibility
Test Your Knowledge
Attempt these questions before reading this article. If you find some difficult or cannot remember the answers, remember to look more closely at that area during your revision.
- What is the main legal effect of holding property as joint tenants rather than as tenants in common?
- If two friends own a house as joint tenants and one dies, who inherits the deceased’s share?
- Can a person leave their share in a jointly owned property to someone in their will? If so, under what circumstances?
- How does severance of a joint tenancy affect the right of survivorship?
- What is the inheritance tax treatment of a deceased’s share in a property held as joint tenants with a non-spouse?
Introduction
When two or more people own property together, the way in which their interests are held determines what happens to the property on death. The legal structure of joint ownership is essential for succession, as it may mean that property passes automatically to a survivor outside the estate, or instead forms part of the estate to be distributed by will or intestacy. For SQE1, you must be able to explain the difference between joint tenancy and tenancy in common, apply the rules of survivorship, and understand the consequences for inheritance tax and estate administration.
Joint Tenancy and Tenancy in Common
Joint Tenancy
Where property is held as a joint tenancy, each owner is entitled to the whole property rather than a defined share. The key feature is the right of survivorship: when one joint tenant dies, their interest passes automatically to the surviving joint tenant(s), regardless of any will or intestacy rules.
Key Term: joint tenancy A form of co-ownership where each owner is equally entitled to the whole property, and the right of survivorship applies on death.
This means that the deceased’s interest does not form part of their estate and cannot be left by will. The property passes outside the estate, and the personal representatives have no authority over it.
Tenancy in Common
By contrast, a tenancy in common gives each co-owner a distinct share in the property, which may be equal or unequal. There is no right of survivorship. On death, a tenant in common’s share forms part of their estate and passes according to their will or, if there is no will, under the intestacy rules.
Key Term: tenancy in common A form of co-ownership where each owner has a separate, defined share in the property, which can be left by will or pass under intestacy.
Survivorship and the Passing of Property
The right of survivorship is automatic in a joint tenancy. If three people own a house as joint tenants and one dies, the remaining two become joint tenants of the whole property. This continues until only one survives, who then owns the property outright.
If the property is held as tenants in common, each owner’s share passes into their estate on death. The personal representatives must deal with that share as part of the estate, and it can be left by will or pass under intestacy.
Severance of Joint Tenancy
A joint tenancy can be severed—converted into a tenancy in common—by written notice, mutual agreement, or certain acts (such as selling or transferring a share). Once severed, the right of survivorship no longer applies, and each owner’s share will pass under their will or intestacy.
Key Term: severance The process by which a joint tenancy is converted into a tenancy in common, ending the right of survivorship.
Practical Consequences
Property Passing Outside the Estate
Where property is held as joint tenants, the deceased’s interest passes directly to the survivor(s) and does not form part of the estate for succession purposes. This can override the deceased’s intentions in their will.
Property Passing Into the Estate
If property is held as tenants in common, the deceased’s share is included in the estate and can be left to any beneficiary by will or pass under intestacy.
Inheritance Tax Implications
For inheritance tax, the deceased’s share in jointly owned property is generally included in their estate, even if it passes by survivorship. However, if the surviving co-owner is a spouse or civil partner, the spouse exemption may apply. Where the co-owner is not a spouse or civil partner, the value of the deceased’s share is included in the estate for tax purposes.
Recent Legislative Developments
Recent changes have affected the rules on intestacy and parental responsibility:
- The Inheritance and Trustees’ Powers Act 2014 disapplies the presumption that a deceased was not survived by their father or second female parent if they are registered on the birth certificate.
- The Human Fertilisation and Embryology Act 2008 allows a child to have a second female parent, affecting inheritance rights.
- The Children Act 1989 now gives automatic parental responsibility to unmarried fathers and second female parents named on the birth certificate.
These changes reflect the recognition of modern family structures and can affect who is entitled to inherit under intestacy.
Worked Example 1.1
Scenario: Anna and Brian own a house as joint tenants. Anna dies, leaving a will giving all her property to her daughter, Zoe. Who inherits the house?
Answer: Brian automatically becomes the sole owner of the house by survivorship. Anna’s interest does not pass under her will to Zoe.
Worked Example 1.2
Scenario: Clare and David own a flat as tenants in common, each with a 50% share. Clare dies intestate, survived by her husband and two children. Who inherits Clare’s share?
Answer: Clare’s 50% share forms part of her estate and passes under the intestacy rules to her husband and children.
Worked Example 1.3
Scenario: Two friends, Emily and Farah, own a property as joint tenants. Emily wishes to leave her share to her brother in her will. What must she do?
Answer: Emily must sever the joint tenancy, converting it to a tenancy in common. Only then can she leave her share by will.
Exam Warning
If a joint tenant dies, their interest passes automatically to the survivor, even if their will states otherwise. Always check the form of co-ownership before advising on succession.
Revision Tip
Remember: joint tenancy = survivorship, property passes outside the estate; tenancy in common = no survivorship, share passes into the estate.
Key Point Checklist
This article has covered the following key knowledge points:
- Joint tenancy involves the right of survivorship; the deceased’s interest passes automatically to the surviving co-owner(s).
- Tenancy in common gives each owner a separate share, which passes into their estate on death.
- Severance converts a joint tenancy into a tenancy in common, ending the right of survivorship.
- Property held as joint tenants passes outside the estate for succession, but is usually included in the estate for inheritance tax.
- Recent legislation recognises modern family structures and affects intestacy and parental responsibility.
- Always check the form of co-ownership before advising on succession or drafting a will.
Key Terms and Concepts
- joint tenancy
- tenancy in common
- severance
