'Legal Landscape' - How can I co-own property and what difference does it make?

Darren Donnithorne and Stephanie Matthews from Marshall Diel & Myers Limited Property & Estate planning team answer your property related questions and issues in this monthly edition of 'Legal Landscape' with Marshall Diel & Myers Limited.

Question: How can I co-own property and what difference does it make?

If you buy a residential property with your spouse, partner or other members of your family, it is important to consider how each owner will hold title to the property, as this can make a big difference to your legal rights over the property. 

Two or more co-purchasers can own property in one of two ways, either as ‘joint tenants’ or as ‘tenants in common’.

A ‘joint tenancy’ means that the property is owned jointly by all purchasers and there are no divisible shares attributable to each owner. A joint tenant cannot sell their interest in the property independently of other owners. In addition, a ‘right of survivorship’ applies, which means that if one owner dies then their share automatically goes to the remaining owners regardless of any statement to the contrary within the deceased’s will. A ‘joint tenancy’ is typically appropriate for married couples, the intention being that the survivor will automatically own the marital home upon the death of one spouse. 

A ‘tenancy in common’ means that the property is owned jointly by all purchasers in divisible shares. For example, two owners could decide to hold a half share each or, if one party invests two third of the purchase monies, then perhaps a two thirds to one third share would be more appropriate. Each owner therefore has a separate and distinct share of ownership in the property, and is technically able to sell their share to a third party without the consent of the remaining owners. However, the owners can protect against this by, say, preparing a separate deed to obligate each owner to offer their share for sale to existing owners before selling to a third party. With tenants in common, the ‘right of survivorship’ does not apply. If one owner dies then their share does not automatically go to the remaining owners, but instead passes through the deceased’s will or intestacy. As such, it is very important that each owner has an up to date will in place. A ‘tenancy in common’ is typically appropriate for family members or friends, where the owners would prefer to leave their share to third parties.   

A ‘joint tenancy’ can later be converted to a ‘tenancy in common’ by a process known as ‘severance’, which typically occurs in one of the following ways:

  1. Unilateral act of one owner – This can be voluntary (e.g. a written notice served on all other owners to confirm severance) or involuntary (e.g. bankruptcy).
  2. Mutual agreement – The owners can mutually agree to sever the joint tenancy.
  3. Mutual conduct – A course of dealing whereby one party makes it clear to the other that they no longer wish to own as joint tenants. 

After severance, the owners will typically own in equal shares as tenants in common.

Similarly, a ‘tenancy in common’ can be converted into a ‘joint tenancy’, but that would require the consent of all owners and tends to be fairly rare in practice. 

Whichever method of ownership you choose, it is important to note that a co-owner may be able to force the sale of the property against the wishes of the remaining owners. The Partition Act 1855 provides the means for a co-owner to apply to the Supreme Court for an order for sale of the property in certain circumstances, albeit a more detailed explanation is beyond the scope of this article.

So when purchasing a property with other people, it is important to get legal advice on how the property will be owned by the purchasers and to review such ownership on a regular basis going forwards. Your circumstances may change, and a change to the manner in which you co-own property may be necessary as a result.  

This article was written by Darren Donnithorne (Senior Associate & Head of the Property and Estate Planning Team) and Stephanie Matthews (Associate of the Chartered Institute of Legal Executives).  

This column is for general guidance only. It should not be used as a substitute for professional legal advice. Before proceeding with any matters discussed here, persons are advised to consult with a lawyer.

Got Questions? 

If you have any property questions or issues, please contact us at darren.donnithorne@law.bm or stephanie.matthews@law.bm. We would be happy to work with you to help you navigate the legal landscape in Bermuda, and you may even find your question featured on propertyskipper.  We look forward to hearing from you! 

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