Understanding Tenants in Common: Key Tips for Getting Your Ownership Percentages Right

Oct 30, 2024

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When buying property, the decision to purchase as tenants in common can offer a flexible way to own property, especially if you’re purchasing with a partner, friend, or family member. However, it’s essential to understand the unique considerations involved with tenants in common ownership—especially setting the correct ownership percentages at the outset. Here, we’ll cover everything you need to know about getting the right ownership setup to avoid any complications down the line.

What Does "Tenants in Common" Mean?

In a tenants in common arrangement, each person owns a specified share of the property. This ownership share can be equal or vary depending on each party’s contribution or agreement. Unlike joint tenancy, where ownership is automatically divided equally, tenants in common gives you the flexibility to own a percentage that reflects your investment. Importantly, this ownership structure also allows each party to pass on their share independently through a will, providing additional control over your investment.

Why Setting Ownership Percentages Correctly Matters

Establishing the right ownership percentage from the beginning is crucial. This not only defines how much each party owns but can impact finances, tax implications, and future property rights. Changing these percentages after the contract is signed can be complex, involving legal challenges and potential bank complications. Banks may be hesitant to alter financing arrangements if the ownership structure isn’t clearly defined and settled upfront, which can disrupt the property transaction process.

Steps to Take When Purchasing as Tenants in Common

When purchasing property as tenants in common, follow these steps to ensure a smooth process:

  1. Consult with Professionals: Always seek guidance from a bank, broker, and legal practitioner to help determine the most appropriate ownership split. This expert advice will provide clarity on how to structure the ownership arrangement to meet your unique financial and personal needs.
  2. Do Your Due Diligence: Understand the financial implications of the ownership split you choose. Ownership percentages impact financial responsibilities like mortgage payments, taxes, and other expenses. By being clear on your individual responsibilities from the outset, you’ll prevent misunderstandings later on.
  3. Document Your Agreement: Once your ownership percentages are decided, document this decision thoroughly with your legal advisor. This documentation should be included in the contract and clearly outline each party’s rights and obligations. Ensuring everything is official protects your investment and provides a clear legal reference.
  4. Plan for Future Scenarios: Life circumstances can change, and it’s worth considering how your ownership will be affected by future events, such as selling your share or passing it on in a will. Make provisions in your agreement to account for these possibilities.

Avoiding Common Pitfalls in Tenants in Common Ownership

When ownership percentages aren’t defined carefully, disputes can arise. Changes after contracts are finalised can lead to additional legal fees, administrative costs, and potential financing issues. Additionally, remember that banks and financial institutions may not approve post-contract alterations easily, as it complicates loan terms and valuations. By following the steps above, you can avoid these pitfalls and set up your property ownership in a way that’s legally sound and financially stable.

Making Your Property Purchase Smooth and Secure

For prospective buyers, purchasing as tenants in common can be an advantageous way to co-own property with flexibility and security. By getting the ownership percentages right from the beginning, you can ensure a smooth and well-documented purchase process that protects your investment and future rights. Consulting with the right professionals and making informed decisions will provide peace of mind as you move forward with your purchase.


Need more guidance? AQWASUN Estate Agents are here to help you understand every step of your property journey, including detailed advice on ownership structures like tenants in common. Contact us today to discuss your property goals!