Tenants in Common in Ireland: What Does It Mean?

What is Tenants in Common? What does Tenants in Common mean and how does it differ from a joint occupancy? In this guide, we walk you through what a Tenants in Common agreement is and why it may be a choice for you.

Navigation:

What Is Tenants in Common in Ireland?

Tenants in Common is a kind of co-ownership agreement that permits more than someone to have a right to a residential or commercial property or a plot of land. Despite the name, it does not have anything to do with occupancy contracts when renting as is purely used for those who have ownership over a freehold residential or commercial property.

How Does Tenants in Common Work?

Tenants in Common is an arrangement that breaks up the ownership of a residential or commercial property in between two or more individuals. It works like purchasing shares in a business where the ownership is divided up by a percentage and each individual is provided ownership of part of the residential or commercial property.

Tenants in Common Example For Instance, if 3 people, John, Maria, and Hannah, decide to participate in an Occupants in Common agreement when buying a home, they can divide the ownership of the residential or commercial property up between themselves. Say in this case, Hannah had the higher wage and was paying a majority of the mortgage so she takes 50% of the ownership. John and Maria, who pay less towards the mortgage then take 25% each of the ownership.

The division of the ownership share can be based on anything and not always who pays what, however this is a great example to highlight the concept.

What Rights Do Tenants in Common Have?

In an Occupants in Common contract, the rights of each owner of the residential or commercial property have the same rights and benefits as one another. They are each the legal owners of the residential or commercial property and the quantity of ownership held does not figure out the rights accordingly. The differences lie in the real ownership of residential or commercial property.

What Does Tenants in Common Mean for Taxes?

Especially when it comes down to Local Residential Or Commercial Property Tax, it can be puzzling who pays what when you have a Tenants in Common agreement in place. Since everyone has ownership of the residential or commercial property, who has the tax liability can be a confusing concern to address.

Who Pays Local Residential Or Commercial Property Tax?

Probably the most complicated concern when it concerns paying tax under a Renters in Common contract is who is liable for the Local Residential Or Commercial Property Tax (LPT). LPT is used to each home - whether owner or occupant - and is paid in instalments over a year to your regional council.

Since Local Residential or commercial property Tax is paid on the residential or commercial property, in the case of a Renters in Common arrangement, everybody in the arrangement is liable for the tax. This doesn't indicate that everyone requires to pay 3 times the rate, however that each individual in the contract is accountable for paying a part of it.

Naturally you can agree independently in between the renters who spends for what and there are no legal ramifications or guidelines as to how you pay - as long as you do pay!

Capital Gains Tax

Capital gains tax in Ireland is paid when you offer, exchange or distribute a particular possession. The tax is applied on any earnings you make after you have actually gotten rid of the possession and is generally charged as a standard rate of 33% with the first EUR1,270 of gains exempt.

With a Renters in Common arrangement, the capital gains tax is paid by the individual who is offering their share of the residential or commercial property. So if just someone chooses to offer their ownership, they will pay the capital gains tax however nobody else will.

Estate tax

If you wish to pass you part of the tenants in typical contract onto your children or somebody else, you will need to pay the inheritance tax. In Ireland, the estate tax is divided into 3 groups that all have a various limit when it comes to paying the tax:

Group A This typically consists of a direct parent-child relationship and also vice-versa under some situations. If this group uses to you you will not be taxed for the first EUR335,000 of the value. Group B This groups includes relationships such as inheritance in between brother or sisters, cousins, grandchildren or nieces and nephews. In these cases, the threshold is EUR32,500. Group C This group consists of any of the relationships in neither Group A or Group B and has a threshold of EUR16,250. Despite the group your in, you would pay a 33% tax rate on anything above the part of the occupants in typical arrangement. With a tenants in common contract, just your share of the residential or commercial property will be counted towards your estate and not the entire residential or commercial property.

What happens to mortgages under Tenants in Common? If you take out a mortgage under a Renters in Common contract, you can effectively divide up the expense of that mortgage and the deposit in between the occupants.

This means that all the renters will need to have their signature on the loan and the liability is on every one of them.

This can be substantial in the case of default that can jeopardise the residential or commercial property's ownership that could be repossessed by the lending institution.
apartments.com
Try our Mortgage Calculator!

Tenants in Common vs. Joint Tenants

Often Tenants in Common is confused with a joint tenancy. Although they are both co-ownership arrangements, they have a lot of differences when it concerns how the ownership is organized.

What Is a Joint Tenancy?

A joint tenancy is where all the members of the agreement have an equal share of the residential or commercial property and it is not separated into portions. In the example from above with John, Maria and Hannah, each of them would own 33.3% automatically.

How Does Tenants in Common Differ?

Despite being very similar, a joint occupancy is really various from a renters in typical arrangement when it concerns modifications in the contract. When it comes to renters in common, a specific owner can offer their part of the residential or commercial property separately without impacting the rest of the arrangement.

With a joint tenancy however, it can end up being far more complicated if somebody wishes to leave the contract considering that it is not based upon ownership share but rather on having 2 names on the arrangement. For instance, it is not as easy to have somebody new on the agreement if it's a joint occupancy.

Moving House? Establish All Your Utilities At the same time!

Set up your energy, broadband and waste in one problem-free call!

Need To Figure Out Your Utilities for Your Move?

We're currently closed but please leave us your number and we'll provide you a free call as soon as we're open!

How Do You End a Renters in Common Agreement?

Ending a Tenants in Common arrangement resembles ending your share in a company. When the partners in the arrangement have actually decided to go their separate ways, one of the tenants can purchase out the others in the contract so that they own the whole residential or commercial property.

If the occupants refuse to work together, the arrangement can be taken to court where a judge will purchase the partition of the residential or commercial property or to offer it as one system. Whatever takes place, the residential or commercial property's ownership should be fixed with one renter owning 100% of the freehold by the end of it.

What Happens If an in Common Dies?

A Tenants in Common agreement can make processes a lot easier when it comes to dealing with a tenant's death.

Since the tenants in the arrangement all own a part of the arrangement in their own right, they August pick to write it into their will as part of their estate. This means that the agreement can pass on to whoever they choose to succeed them.

Even if a renter does not write the death of ownership, it still enters into their estate. This can end up being an issue for the other renters because - unlike a joint occupancy - the ownership isn't passed instantly onto them. This can make things more made complex down the line.

Advantages and disadvantages of Tenants in Common

There are many benefits to Tenants in Common plans that, particularly in existing housing market conditions, can make things a lot much easier for first-time buyers. There are likewise many disadvantages that can cause issues when it concerns Tenants in Common that can make it riskier than other arrangements:

Learn more about our deals from energy, broadband and waste collection companies!

By David Tait

Editorial Manager

David started his journey at Selectra in March 2021. With his expertise in different Irish energy markets, he has a strong focus on the energy market. In addition, David recognizes with Irish broadband, waste collection, and security alarms markets. His well-rounded understanding of these sectors enables him to supply important insights and contribute efficiently to the group.