CG70500 - Land: tenants in common and joint tenants
Introduction
Where two or more persons jointly own an interest in a piece of land in the UK, they will hold that land either as 'joint tenants' or as 'tenants in common'. In Scotland the equivalent terms are 'joint owners' and 'owners in common'.
In Northern Ireland, 'tenants in common' are also known as 'coparceners'.
The differences between these two situations, and the importance of those differences, are described below.
The terms 'joint tenancy' and 'tenancy in common' describe the relationship between the joint owners of the land. In this context a 'tenant' is not necessarily a person occupying the land under a lease. The terms 'joint tenancy' and 'tenancy in common' can apply equally to the joint ownership of freehold and leasehold interests.
Tenants in common
Where land is held by 'tenants in common', each tenant is the sole owner of a fractional share in the whole land. On the death of one of the tenants in common, their fractional share passes to their personal representatives; it does not pass to the surviving tenants in common.
It will not necessarily be the case that tenants in common will have equal interests in the land; they may have unequal interests, for example one tenant may have a 75% interest, the other a 25% interest. Taking this example, on a sale of the land, the first will be entitled to 75% of the net sale proceeds, the other will be entitled to 25% of those proceeds.
Joint tenants
The major difference between a tenancy in common and a joint tenancy is that a joint tenant is not the absolute owner of a fractional share in the land. As a result, on the death of a joint tenant, his or her interest in the land passes to the surviving tenant or tenants, rather than to the personal representatives of the deceased.
In contrast to tenants in common, a joint tenancy can only exist where the tenants have equal interests in the land and where those interests were acquired at the same time.
Furthermore, on the death of a joint tenant, his or her interest in the land passes to the surviving joint tenants; it cannot be passed by will. Therefore such an interest is not an asset which the deceased was competent to dispose of and as such would not be deemed to be acquired by the surviving tenant, or tenants, under the normal rule in TCGA92/S62 (1) (see CG30320C). Notwithstanding this however, TCGA92/S62(10) specifically provides for a share in an asset held by a joint tenant to come within TCGA92/S62. As a result such interests benefit from the provisions of TCGA92/S62 (1) deeming:
- there to be no disposal by the deceased, see CG30320, and
- the acquisition by the personal representatives or legatees to be at probate value, see CG30730.
Disposal by joint tenants
Where land held by joint tenants is disposed of, each tenant is entitled to an equal share of the net sale proceeds. This rule applies even if the joint tenants have not contributed equally to the cost of acquiring the land. The chargeable gain, or allowable loss, arising on the disposal should be computed on this basis.
However, if the joint tenants divide the proceeds in accordance with their contributions to the cost of the land, that division should be accepted for Capital Gains Tax purposes, provided that all the joint tenants signify their agreement in writing.
Severance of joint tenancy
If a joint tenant wishes to dispose of the whole or part of his or her interest in the land, without the other tenant or tenants doing likewise, the joint tenancy must be severed and converted into a tenancy in common, at which point the joint tenancy will come to an end. Only then can the tenant in question dispose of an interest in the land.
If, after the disposal, there remain two or more persons with concurrent interests in the land, they will be tenants in common rather than joint tenants. This must follow, since they will have acquired their interests at different times.
There are other methods of converting a joint tenancy to a tenancy in common, for example when the joint tenants agree that this should occur. Such a conversion will only have Capital Gains Tax consequences if one or more of the former joint tenants have reduced their interests in the land.