Severance of Tenancy
In England and Wales, property (generally immovable assets such as land and buildings) can be owned with other people in two ways:
a joint tenancy;
tenancy in common
This focus of this article is on joint tenancy.
Where there is a joint tenancy, co-owners own the whole of the property, both collectively and equitably. Thus, two co-owners do not own 50 percent, but rather half the whole. Under rights of survivorship, on the death of one of the joint tenants, the jointly owned interest accrues to the remaining joint tenant.
Thus, the deceased joint tenant’s interest ends on death and is automatically incorporated into the interests of the survivor. This means that should the deceased have wished for their interest in that property to pass to someone other than the joint tenant, this cannot and will not happen – even if there is a Will naming chosen beneficiaries as inheritors of the interest in that property.
In order to remove the right of survivorship, a beneficial joint tenant must sever the tenancy prior to death; this cannot be done retrospectively.
…co-owners have no rights or methods to reject or ignore the severance. Moreover, the unilateral nature of the act means mental capacity of the co-owner to understand the action is not a requirement.
Severance prevents the interest in a jointly owned property from accruing, by survivorship, to the other co-owners. For example, severance could be used by a married/civil partnership couple who are joint owners of their principle private residence (family home), but who want their respective children (assume they have none together) to inherit their own interests. Severance enables their share to be included as part of the free estate. If they continued to hold the property as joint tenants, it would automatically pass to the survivor on first death and then on to their beneficiaries when the time comes.
It might be assumed severance must be agreed between co-owners. Not at all, this is not the case. Severance is actually a unilateral act and provided formalities are complied with, co-owners have no rights or methods to reject or ignore the severance. This is even the case for spouses/civil partners. Moreover, the unilateral nature of the act means mental capacity of the co-owner to understand the action is not a requirement.
Severance only affects the share of the person severing the interest. Thus, where there are four co-owners of a joint tenancy, severance by one will result in the property interests being one tenant in common and three joint tenants. N.B. it is not possible for severance to produce unequal shares, say a 60-40 split. If this is a requirement, it can only be achieved post-severance by agreement among the co-owners,
Severance is usually affected by post and specifically, registered post. If the notice is not returned, it will be deemed duly served, even if the addressee claims or actually never sees the notice. It is inadvisable to affect a notice by ordinary post as there can be no proof of delivery. After severance, an application can be made to Land Registry to enter a restriction on the title of the property, preventing a sale by a single owner.
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Severance of tenancy is a consideration in tax planning and is used as a method to reduce one’s estate with reference to local authority assessment for care home fees. It is always important to review your circumstances as family life evolves and when cultural, political and tax legislation changes occur. Keep up to date with developments and seek expert advice from firms like TWB, but know that TWB is at the forefront of its profession.
Estate Planning is an integral part of our service. As well as minimising the effects of IHT, many families wish to ensure the preservation of their wealth through several generations by making provision for children, whilst also considering events such as divorce, bankruptcy and accounting for later-life care. We have written thousands of Wills and helped countless clients with IHT planning, Lasting Powers of Attorney (LPA) and much more.
Contact Jules Jack for more information: julesj@twb.org.uk - 020 8920 3360