When two people are purchasing a property together, their solicitor must advise them on the difference between holding the property as joint tenants or tenants in common.
Although this may seem like a relatively small part of the conveyancing process, the decision can have significant financial consequences. Where a solicitor fails to provide clear, appropriate advice or does not record the purchasers’ decision correctly, this may give rise to a professional negligence claim if financial loss is suffered as a result.
What are the differences between joint tenants and tenants in common?
When two people purchase a property together, they generally hold it as either joint tenants or tenants in common. Although the distinction may seem technical, the implications are significant.
| Joint Tenants | Tenants in Common |
| Equal ownership of the whole property | Ownership in defined shares (which may be unequal) |
| Automatic right of survivorship (passes to co-owner on death) | Share passes under a will or intestacy |
| No protection for unequal contributions | Contributions can be protected through a declaration of trust |
For more information on the different types of ownership and the issues purchasers should consider, read our blog Legal Considerations When Buying Property with a Partner and Signing on the Dotted Line.
Why does the form of co-ownership matter?
Choosing the wrong form of co-ownership can lead to serious unintended consequences:
- Unequal contributions and relationship breakdown: where one party contributes more towards the purchase price, it is important that both purchasers understand how their ownership arrangements affect that contribution and that it is properly documented.
Without appropriate advice, clients may not understand that they will lose the benefit of their greater contribution if the property is held as joint tenants. If the relationship later breaks down or the property is sold, this can result in a significant financial loss.
In contrast, holding the property as tenants in common, supported by an appropriately drafted declaration of trust will ensure that each party’s contribution is protected.
- The owners’ estate: the form of ownership also affects what happens on death. For example, a client may wish to leave their share of a property to children from a previous relationship or another beneficiary. Under a joint tenancy, the right of survivorship applies, meaning the deceased owner’s beneficial interest automatically passes to the surviving co-owner rather than passing under their Will. Where property is held as tenants in common, however, an owner’s share can pass under their Will or, if there is no valid Will, under the intestacy rules.
Failure to understand this distinction can prevent a client’s wishes from being carried out on their death.
Solicitors’ duty to provide advice on co-ownership
A solicitor has a responsibility to explain the co-ownership options to the purchasers in clear and understandable terms. This advice may vary depending on whether the purchasers have owned a property before but should avoid ‘legal jargon’ or generic information.
This should include explaining the implications of each form of ownership and advising on an appropriate ownership structure in light of the purchasers’ instructions and circumstances.
Relevant considerations may include:
- whether the purchasers are married or in a civil partnership;
- how much each party is contributing towards the purchase;
- whether one party is contributing a substantially larger deposit;
- whether money has been provided by parents or other family members;
- whether the parties intend to own the beneficial interest equally or in different proportions; and
- what each party intends to happen to their interest in the property when they die.
Solicitors also have a duty to follow their clients’ instructions. If a legal adviser has made an administrative error which records the decision of co-ownership incorrectly, and this has resulted in adverse consequences, the solicitor has likely breached their duty to their client.
Generic advice such as a standard leaflet or template letter is unlikely to be sufficient to discharge this duty.
Where there is any imbalance between the parties (for example, financial contribution or influence), solicitors should take particular care to ensure that each client receives appropriate, individual advice even if this means being referred to another solicitor.
What to do when things go wrong
Professional negligence claims involving co-ownership can arise in a number of different circumstances. Examples may include where a solicitor:
- fails to explain adequately the difference between joint tenants and tenants in common;
- fails to consider or advise on the significance of unequal contributions towards the purchase;
- fails to advise that a declaration of trust may be appropriate;
- prepares a declaration of trust which does not accurately reflect the purchasers’ agreed intentions;
- records the purchasers as joint tenants when they intended to hold the beneficial interest as tenants in common, or vice versa;
- fails to explain the effect of the right of survivorship;
- fails to consider a client’s stated intention for their share of the property to pass to children or another beneficiary;
- receives the correct instructions but records or implements them incorrectly; or
- fails to identify or appropriately address a conflict of interest between the purchasers.
Whether any of these circumstances amounts to professional negligence will depend upon the facts of the particular case and the advice that a reasonably competent solicitor would have provided.
What do you need to prove in a professional negligence claim?
Where a when advising on co-ownership, a professional negligence claim may arise. To succeed, it will generally be necessary to establish duty of care, breach of duty, causation and loss.
Duty of care
Solicitors generally owe a duty of care to their clients and must exercise reasonable care and skill when carrying out the work they have been instructed to undertake. This can include providing appropriate advice about co-ownership as part of a property purchase.
Breach of duty
A breach may occur where the solicitor fails to provide appropriate advice, does not properly consider the purchasers’ intentions, fails to advise on protecting unequal contributions or incorrectly records the chosen form of ownership.
The question will be whether the solicitor’s conduct fell below the standard reasonably expected of a competent solicitor carrying out that type of work.
Causation
It is not enough simply to show that the advice was inadequate or that a mistake was made. You must also demonstrate that, had appropriate advice been given, the outcome would have been different.
For example, you may need to show that you would have chosen to hold the beneficial interest as tenants in common in specified unequal shares or entered into a declaration of trust protecting your greater financial contribution.
Loss
There must also be a financial loss caused by the solicitor’s breach. This could include receiving less from the proceeds of a property than you would have received had your intended beneficial interest been properly recorded, or losing the benefit of a greater financial contribution towards the purchase.
What evidence may be relevant?
The evidence required will depend on the circumstances, but relevant documents may include:
- the solicitor’s conveyancing file;
- emails and other correspondence with the solicitor;
- the transfer deed;
- any declaration of trust;
- mortgage documentation; and
- bank statements or other evidence showing how the purchase was funded.
These documents can help establish what advice was provided, what instructions were given and what the purchasers intended at the time of the purchase.
Is there a time limit for bringing a professional negligence claim?
Professional negligence claims are subject to strict limitation periods. In many cases, court proceedings must be brought within six years of the relevant cause of action accruing.
However, problems involving co-ownership may not become apparent until years later, perhaps when a relationship breaks down or the property is sold.
In some circumstances, an alternative limitation period based on when the claimant acquired the necessary knowledge may apply. Limitation rules can be complex, so it is important to seek advice promptly if you believe you may have a claim.
How we can help
Many people only discover the consequences of a co-ownership decision when a relationship breaks down or a loved one passes away. By then, the financial consequences can be significant and it can be too late to correct the mistake.
If you feel that you received inadequate advice about property ownership and have suffered a financial loss as a result, you may have grounds to bring a professional negligence claim.
For a no obligation discussion, call us on 0800 987 8800 or email enquiries@bmcf.co.uk.
