Check your agreement to avoid joint tenancy pitfalls

In my last column, I discussed the difficulties that can arise where a partnership holds an agricultural tenancy and there is a change in the constitution of the partnership.

In some instances, that might lead to the end of the tenancy itself, as a partnership is a separate legal person in Scots law; separate from the individual partners within the partnership.

I had a number of telephone calls afterwards from people who were concerned about their own situation. They were worried that they might hold their farm tenancy by virtue of a partnership and that the tenancy might be at risk if a partner was to die or retire.

In the main, however, these were calls from people who held joint tenancies.

This means that each of the tenants holds a joint interest as tenant in the lease as an individual, and it is quite distinct from the situation where a partnership is the tenant.

It is common for a tenancy to be held jointly by different family members, for example by a father and son.

Accordingly, even if joint tenants conduct a family farming business within a partnership, that does not mean that the partnership is the tenant.

A change in the identity of the individual partners will not lead to the end of the tenancy.

However, there are some important consequences of a joint tenancy about which people should be aware.

Generally speaking, a written lease will provide for one of two ways in which a joint tenancy can be held. It can be held by the joint tenants and to the survivor of them, or it can simply be held by the joint tenants equally without any mention of a survivor.

If it is held jointly and to the survivor, this means that on the death of the first joint tenant, their interest as joint tenant passes automatically to the survivor without any legal proceedings having to be carried out.

The survivor becomes the sole tenant in their own right under the same lease.

However, if the tenants hold a joint tenancy without a survivorship destination, steps have to be taken on the death of one of the joint tenants to transfer on that interest after death.

In most cases, the deceased joint tenant’s executors will have a year within which to carry out the necessary procedures to transfer the interest. If this is not done, the tenancy will come to an end.

There are a number of instances where this step has not been followed and secure agricultural tenancies have been lost.

Joint tenants who are unsure of the precise nature of their joint tenancy and whether it will pass automatically to the survivor of them should seek advice so that appropriate provisions are made in their wills to take account of the joint interest after death.

“Steps have to be taken on the death of one of the tenants

FAMILY FARMS: It’s common for members of a family to hold a joint tenancy, but agreements can differ when one member passes away.