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Beneficial Joint Tenants – A Cautionary Tale

Whenever couples are buying property together, one of the first things that would and should be discussed with their legal adviser is how they will be ‘holding’ the beneficial equity. In law, co-ownership of land usually exists through a trust of land. The legal estate will be held by joint tenants on trust for themselves in equity. The joint tenancy is not severable and there must be a minimum of two trustees. In equity the choice is then between holding the property as beneficial joint tenants, tenants in common in equal shares or tenants in common in unequal shares.

How the parties intend to hold the property must be stated on the purchase deed and matters taken into account such as marital status and contributions to the purchase price may lead on to advice to put in place a clear Declaration of Trust, setting out the parties current and future intentions.

The survivorship rules associated with joint tenancies make this method of co-ownership attractive to those who are happy for their share to automatically pass to the co-owner on death. However when considering equalisation of estates and wealthy couples this may not be appropriate. Survivorship rights may also not be intended for those who are not married or in a civil partnership and it would also not be considered suitable in a business relationship.

Prospective co-owners who are not married or in a civil partnership are more likely to consider tenants in common as most appropriate whether in equal or unequal shares subject to contributions. Children from previous relationships will also be a contributory factor when considering how to distribute an estate on death.

Many experienced in property purchase will be able to explain the fundamental difference between beneficial joint tenants and tenants in common, but time and again whether through pressure to complete a deal or faith in the current relationship they are in, it leads clients to be lax in how seriously they take this issue.

This has been highlighted in a recent case where a property was purchased in 2009 by an unmarried couple jointly with one party only funding the purchase price of £1,550,000 and associated costs, Rowland v Blades [2021] EWHC 426 (Ch). The property was intended as a weekend or holiday home for the couple themselves, who were individually wealthy in their own right and had not during the course of their relationship pooled their resources. Sadly, the relationship broke down shortly after the property was purchased, although Ms Blades continued to use it almost as her main residence between 2009 and 2018.

Dr Rowland brought the claim for the sale proceeds to be entirely his, together with a claim for occupational rent. He asserted that he was in fact the sole beneficiary of the equitable estate and that he and Ms Blades had held the legal title on trust for him, as he had initially paid for the property without any contribution from Ms Blades.

In reaching his judgment Deputy Master Hansen held that there had been sufficient common intention from the outset to share the property equally which had not been altered following the break down of the relationship; despite the purchase price having been provided solely by Dr Rowland.

The case serves as a warning to those entering into property purchases whether in the course of their personal or business relationships. Take property advice regarding beneficial ownership status, if appropriate enter into a Declaration of Trust clearly setting out contributions and shares and don’t cut corners. Any decisions taken in haste can often cause the decision maker to repent at leisure.

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