The Declaration of Trust will set out each owner’s share in the property. It also sets out the rights and obligations of each owner in relation to the property, for example, relating to payment of outgoings and mortgage contributions. The document details what should happen if one owner wishes to “walk away” from the property. In those circumstances, the opportunity is given to the remaining owner to buy out the share of the owner who wishes to leave. If a buy out does not happen then the property is placed on the open market. The Declaration of Trust can detail how the property’s open market value should be determined in the event of any disagreement. The proceeds of sale of the property would then be distributed to the owners in the shares as recorded in the Declaration of Trust.
There are two different ways in which property can be owned when purchased jointly; either as ‘joint tenants’ or ‘tenants in common’. Both mean that the property is owned jointly but the way it is viewed in law is very different.
If you own a property as joint tenants, then you each own the whole of the property together. If one of the owners were to pass away, the property would continue in the name of the surviving owner or owners. This happens regardless of the terms of the will.
Tenants in Common
If you own a property as tenants in common, you each own your own distinct shares in the property. This allows you to divide up the property into shares, which can be 50/50, 60/40, or whichever proportions you agree between you. Your respective shares in the property will pass in accordance with the terms of your wills. If you decide to own a property as tenants in common it is therefore extremely important that you consider putting a will in place.