Severance of Tenancy

Severance of Tenancy
Severance of Tenancy
Full Overview Of Severance of Tenancy

At DLS Solicitors, we recognise that understanding property law and the various forms of property ownership is crucial for our clients. One more complex and significant aspect of property law is the severance of tenancy, which has far-reaching implications for property rights and inheritance.

This comprehensive overview aims to clarify the concept of severance of tenancy, its legal implications, and practical considerations, ensuring you are well informed and prepared to navigate these matters.

Co-Ownership: Joint Tenancy vs. Tenancy in Common

Before delving into the severance of tenancy, it is essential to understand the two primary forms of co-ownership in England and Wales: joint tenancy and tenancy in common.

Joint Tenancy

Under joint tenancy, co-owners hold property jointly as a single legal entity. Key characteristics include:

  • Right of Survivorship: When one joint tenant dies, their interest automatically passes to the surviving joint tenants, irrespective of any will or intestacy rules.
  • Equal Shares: Joint tenants have an equal, undivided interest in the property. No single tenant owns a specific portion.

Tenancy in Common

In contrast, tenancy in common allows co-owners to hold distinct shares of the property. Key characteristics include:

  • No Right of Survivorship: Each tenant in common can leave their share of the property to beneficiaries of their choice through their will.
  • Distinct Shares: Tenants in common can hold unequal shares in the property, reflecting their respective contributions or agreements.

What is Severance of Tenancy?

Severance of tenancy refers to the process of converting a joint tenancy into a tenancy in common. This change is significant because it alters the fundamental nature of the co-ownership arrangement, particularly concerning the right of survivorship.

Methods of Severance

There are several ways to sever a joint tenancy, each with specific legal requirements and implications:

  1. Mutual Agreement: Joint tenants can agree to sever the joint tenancy. This agreement can be explicit, through a formal written agreement, or implied, through conduct that unequivocally indicates an intention to sever.
  2. Notice of Severance: Any joint tenant can unilaterally sever the joint tenancy by serving a written notice of severance on the other joint tenants. The notice must:
    • Clearly state the intention to sever the joint tenancy.
    • Be communicated to the other joint tenants (posting to the last known address is sufficient).
  3. Act of a Joint Tenant: A joint tenant can sever the joint tenancy through an act that indicates an intention to sever, such as:
    • Selling or transferring their interest in the property to a third party.
    • Entering into a binding contract to sell or transfer their interest.
  4. Court Order: In certain circumstances, the court may order the severance of a joint tenancy. This typically occurs in the context of divorce or the dissolution of a civil partnership, where the court may decide that severance is necessary to achieve a fair division of assets.
  5. Mutual Conduct: Severance can also occur through the conduct of the joint tenants, which shows that all parties mutually regard the joint tenancy as severed. This may include actions such as each tenant dealing with their interest independently or treating the property as if it were held as tenants in common.

Legal Implications of Severance

The severance of a joint tenancy has several legal implications that affect the rights and obligations of the co-owners:

  1. Termination of Right of Survivorship: Severance ends the right of survivorship, meaning that upon the death of one co-owner, their share of the property passes according to their will or the rules of intestacy rather than automatically to the surviving co-owners.
  2. Distinct Shares: After severance, each co-owner holds a distinct share in the property as a tenant in common. These shares can be unequal and may reflect the contributions or agreements made by the parties.
  3. Estate Planning and Inheritance: Severance allows each co-owner to control the disposition of their share of the property upon their death. This is particularly important for estate planning, enabling individuals to leave their property to beneficiaries of their choice.
  4. Sale or Transfer of Shares: Each tenant in common can sell, transfer, or mortgage their share of the property independently, without the need for consent from the other co-owners.

Practical Considerations

When considering the severance of a joint tenancy, several practical considerations should be taken into account:

  1. Communication and Agreement: Open communication among co-owners is crucial. A mutual agreement can simplify the process and reduce potential conflicts if all parties agree to the severance.
  2. Formal Documentation: Whether severance is achieved through mutual agreement or notice, it is essential to document the process formally. A written agreement or notice of severance should be clear, unequivocal, and properly served to ensure legal validity.
  3. Valuation of Shares: If the property is to be sold or divided, obtaining a professional valuation can help determine the value of each co-owner’s share. This is important for ensuring a fair and equitable division.
  4. Impact on Mortgages and Debts: Severance may affect existing mortgages or debts secured against the property. Co-owners should review their financial arrangements and seek advice from mortgage lenders or financial advisors to understand the implications.
  5. Tax Considerations: Severance of tenancy can have tax implications, particularly concerning capital gains tax and inheritance tax. Professional tax advice is recommended to understand the potential liabilities and benefits.
  6. Dispute Resolution: In cases where co-owners cannot agree on severance or the division of the property, dispute resolution mechanisms, such as mediation or arbitration, can help resolve conflicts without resorting to litigation.

Case Studies: Practical Applications of Severance of Tenancy

To illustrate the practical applications and considerations associated with severance of tenancy, let’s explore a few case studies.

Amicable Severance for Estate Planning

Mr and Mrs White own their family home as joint tenants. They have two children and wish to ensure that their shares of the property can be left to their children upon their death. They decide to sever the joint tenancy to facilitate their estate planning:

  1. Mutual Agreement: Mr and Mrs White agree to sever the joint tenancy and hold the property as tenants in common.
  2. Formal Documentation: They draft a written agreement and serve notice of severance on each other. They also update their wills to reflect their wishes for their respective property shares.
  3. Valuation: They obtain a professional valuation of the property to determine the value of each share.
  4. Estate Planning: By severing the joint tenancy, Mr and Mrs White ensure that their shares of the property can be left to their children, providing clarity and control over their estate.

Unilateral Severance in a Relationship Breakdown

Mr Brown and Ms Green own a property as joint tenants. Following the breakdown of their relationship, Mr Brown decides to sever the joint tenancy to reflect their separate financial interests:

  1. Notice of Severance: Mr Brown serves a written notice of severance on Ms Green, clearly stating his intention to sever the joint tenancy.
  2. Communication: Although the relationship is strained, Mr Brown ensures that the notice is adequately communicated to Ms Green.
  3. Legal Advice: Both parties seek legal advice to understand their rights and obligations following the severance.
  4. Distinct Shares: The severance converts the joint tenancy into a tenancy in common, with Mr Brown and Ms Green each holding a distinct share of the property. They can now independently decide how to deal with their respective shares.

Court-Ordered Severance in Divorce Proceedings

Mr and Mrs Black are going through a divorce. As part of the financial settlement, the court orders the severance of their joint tenancy:

  1. Court Order: The court issues an order severing the joint tenancy to achieve a fair division of assets.
  2. Professional Valuation: A professional valuation is conducted to determine the value of the property and each party’s share.
  3. Division of Property: The property is divided into distinct shares, with Mr and Mrs Black each holding their respective shares as tenants in common. This allows for an equitable distribution of assets as part of the divorce settlement.

Conclusion

Tenancy severance is a crucial legal process that has significant implications for property ownership and inheritance. By converting a joint tenancy into a tenancy in common, co-owners can gain more control over their shares of the property and plan their estates more effectively. However, this process requires careful consideration, clear communication, and proper documentation to ensure legal validity and avoid disputes.

At DLS Solicitors, we are dedicated to assisting our clients through the complexities of tenancy severance. Whether you are planning your estate, going through a relationship breakdown, or involved in a property dispute, our experienced legal team is here to offer expert guidance and practical solutions. By understanding the intricacies of tenancy severance, you can make informed decisions and protect your property rights and interests.

Severance of Tenancy FAQ'S

Severance of tenancy is the legal process of converting a joint tenancy, where co-owners have equal rights to the whole property with the Right of Survivorship, into a tenancy in common, where each co-owner has a distinct, divisible share of the property.

Reasons for severing a joint tenancy include ensuring that the co-owner’s share of the property can be passed on through their will, protecting the interests of their heirs, or in the event of a relationship breakdown between the co-owners.

A joint tenancy can be severed by the mutual agreement of all joint tenants or unilaterally by one joint tenant. The most common method is by serving a notice of severance on the other joint tenant(s) and ensuring it is recorded appropriately.

A notice of severance is a written document that one joint tenant serves on the other joint tenant(s) to inform them of the intention to sever the joint tenancy. This notice should be clear, unequivocal, and properly served to be effective.

Yes, after serving a notice of severance, it is advisable to register the severance with the Land Registry by applying for a Form A restriction. This ensures that the change from joint tenancy to tenancy in common is officially recorded.

Severance of tenancy can be contested if there are disputes over whether the notice was properly served or if there is disagreement about the intention behind the severance. Legal advice may be necessary to resolve such disputes.

After severance, each co-owner holds their share of the property as tenants in common. This means each co-owner has a specific, undivided share that they can sell, transfer, or bequeath through their will.

Severance of tenancy terminates the Right of Survivorship. This means that if one co-owner dies, their share of the property does not automatically pass to the surviving co-owner(s) but instead forms part of their estate to be distributed according to their will or the rules of intestacy.

Once a joint tenancy has been severed, it cannot be reversed to a joint tenancy.

The co-owners would need to create a new joint tenancy agreement, which involves transferring the property back into joint names under joint tenancy conditions.

It is advisable to seek legal advice from a solicitor experienced in property law. They can provide guidance on the implications of severance, ensure the notice of severance is correctly drafted and served, and assist with registering the severance with the Land Registry.

Disclaimer

This site contains general legal information but does not constitute professional legal advice for your particular situation. Persuing this glossary does not create an attorney-client or legal adviser relationship. If you have specific questions, please consult a qualified attorney licensed in your jurisdiction.

This glossary post was last updated: 11th July 2024.

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Our team of professionals are based in Alderley Edge, Cheshire. We offer clear, specialist legal advice in all matters relating to Family Law, Wills, Trusts, Probate, Lasting Power of Attorney and Court of Protection.

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