A growing number of properties in the UK are described as ‘life tenancy investments’ as they allow investors to make long-term capital growth investment in less-income-producing properties at a fraction of their current market value.

This legal status on the property, in other words, allows investors to purchase a life estate at a substantial discount on its open market or vacant possession value.

While some people may consider raising a mortgage to purchase wakeley life tenancy investments, an easy and straightforward process, life tenancy can surprise them with its nature. This indicates that raising a mortgage for purchasing a life tenancy or estate is never free of challenges and risks as it may involve dealing with multiple owners who are on the property title. As per common and property law, a life tenant cannot raise a mortgage or sell the property without the agreement of the remaindermen.

What Does Life Tenancy Actually Mean?

A life estate is a form of joint ownership in property or a piece of real estate. In common and statutory law, it is stated that life tenancy or life estate is the ownership of the land that lasts for as long as a person (the owner of the life estate—life tenant) is alive and breathing. The ownership and the rights of an estate end at the owner’s death and the life estate or the ownership of the property may revert to the original owner. This makes it loud and clear that life tenancy creates a win-win situation for both the original owner and life tenant to whom the co-owner status is granted.

Life Tenancy Is Joint Ownership But With Different Rights

Life tenant, a person who holds real estate, land or property can exert full possession and control over the property during his or her lifetime. However, upon the life tenant’s passing, remainderman or the other owner can take full possession and ownership of the property and use it as he/she pleases. During the life tenant’s life, the remainderman cannot exert his or her control, unless stated or allowed in the agreement.

Possible Downsides of Life Tenancy

Well, it not easy for anyone, especially those in their 60’s and beyond to raise mortgage for purchasing a life tenancy. When you need finances to meet your property goals and objectives, it generally gets more difficult for you being a life estate in the property to get access to financing or credit line as prior to putting your life tenant title as a collateral. You need to get the permission of the remainderman or his or her predecessors, if she/he passes. Plus, you cannot expect to reverse the life estate title or deed during your life without the cooperation of the remainderman. Last but not the least, creditors show restraints allowing mortgages in life tenancy and if they do, the amount they allow is extraordinarily less.

What else?

Some mortgages and loans against a piece of land or property, require all owners listed on the deed to agree first to the terms of the loan. This, most of the times creates obstacles for you to get access to financing at par. However, when it comes to borrowing against life estate or raising a mortgage for purchasing a life tenancy, you can still borrow against the property, however, with additional hurdles pressed by the lender. No matter what, the agreement of all the stakeholders involved, including remaindermen in the property ownership is absolutely mandatory for you to acquire a mortgage on the property.