Notice of Severence of Joint Tenancy
In England and Wales, there are two ways in which people can own property. The first is known as joint tenants, otherwise known as beneficial joint tenants. The second is as tenants in common.
A joint tenancy means that the owners all own the entire property. When one party dies, the property is left to the survivors. Usually a married couple would hold as joint tenants, wanting to protect the surviving party following death. A maximum of 4 people can own the property as joint tenants.
Tenants in common is where each owner holds a percentage share in the property. They could own the property equally as tenants in common, each holding a 50% share. The shares do not, however, have to be equal. If the property is sold, each owner will receive their percentage share. If a party dies, their share will pass to the beneficiaries under their Will, or under estate laws. Any number of people can own the property as tenants in common, but only the first 4 names will appear on the registered title. It is important that a Trust deed supports the title if holding as tenants in common, showing the percentage shares of the owners. The principle of tenants in common works in such a way that it prevents one party or survivor selling the property without the other’s permission.
The traditional way to hold property was as joint tenants. If, however, a married couple separate, they may want to transfer to tenants in common so that they hold individual shares in the property. Co-habitees who have children from a previous relationship may choose to hold as tenants in common in order to ensure their children will inherit a share of the property. It may be an idea for a Trust to be created so that should one party die, the survivor has a lifetime interest. This means that the beneficiaries of the other share will not be able to insist on the sale of the property.
When owners wish to transfer their property from joint tenants to tenants in common, notice needs to be served to sever the joint tenancy. This must be done in accordance with Section 36(2) of the Law of Property Act 1925.
Many people are unaware as to which way they hold the property. This can be identified by checking the Proprietorship Register contained in the title deeds. The property is held as tenants in common if the following words appear: “No disposition by a sole proprietor of the registered estate (except a trust corporation) under which capital money arises is to be registered unless authorised by an order of the court.” If there is no such wording, the property is held as joint tenants. In rare circumstances, the property may not be registered with the Land Registry, in which case a memorandum should be placed on the Conveyance transferring the property to the current owners.
A Notice of Severence needs to be served from one party to the other. This should be served with a “without prejudice letter” explaining the severance. Once notice has been served, severance has taken place, it is not necessary for the other party to respond. It is, however, advisable for the receiving party to countersign the notice as acknowledgment. If the property is registered, the next stage is to ensure the Land Registry are informed of the severance. They can then amend the title deeds to show the severance. A standard Notice of Severance may read: “By a Notice of Severance dated … made between … and … the Registered Proprietors of …. Registered under Title Number .. declare that they will henceforth hold the aforementioned property and the net proceeds of sale hereof upon trust for themselves as Tenants in Common.”
Currently, the Land Registry does not charge for severing the joint tenancy. A Conveyancer will be required to complete Form SEV for forwarding to the Land Registry. This can also be carried out online. If all proprietors are registering severance, no legal document is required by the Land Registry. There are currently 24 Land Registry offices around the country and notice must be served by the correct office. Each County Council is assigned to a particular office and a list of the appropriate office can be found on the Land Registry website.
It is important that any mortgage lender is informed of the severance. So long as the owners of the property remain the same, this will have no impact on them.
In the same way that joint tenants can be transferred to tenants in common, the opposite is also possible. To do this, the tenants in common restriction will need to be removed from the title deeds. This is done by completing Form RX3.