Joint Ownership of a Property

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Joint Tenants or Tenants in Common – What does it even mean?

Are you buying a property with someone else?

It is important that you choose the right type of co-ownership agreement at the start of the purchase process to avoid issues down the road.

One of the most important questions to answer when you purchase a property with another person, or several other people, is how you will hold the property, whether it be as Joint Tenants or Tenants in Common.

In this article, we explain the different kinds of joint ownership and what a good co-ownership agreement should include.

join tenants

What types of co-ownership are there?

There are two different types of shared ownership. These include:

Joint Tenants

A purchase as Joint Tenants means that the owners hold 100% of the property, together. Joint Tenants is the default option in a Contract for Sale and Purchase of Land and is the more common manner in which properties are held by multiple owners.

The defining feature of a joint tenancy is that, should one of the owners die, then the remaining owner, or owners absorb the deceased’s share of the property.

For example: Anne and Rob own a property as joint tenants and Anne passes away than Rob becomes the sole owner of the property under the law of Intestacy.

You and your co-owner equally own the property.

But, if either of you die, the property automatically goes to the other party (despite what your Will says).

Married couples or those in de facto relationships.

When you and your co-owner decide to sell the property or when one of you transfers their interest in the property to the other or if one of you ‘severs’ the tenancy.

It’s less expensive and quicker than transferring your interest in the property when you die, and a grant of Probate is not required to register the Notice of Death.

When one joint tenant wants to sell their share but the other does not.

If your relationship with your co-owner breaks down.

If you do not want your property to pass automatically upon your death and want to gift it in your Will.

Tenants in Common

A purchase as Tenants in Common means that each owner holds a percentage share of a property, independent of one another. Tenants in Common, in theory, means that each owner can deal with their interest in the property, independently.

There are two defining features in a purchase of Tenants in Common:

  1. Each owner can gift their share of the property under their Will; and
  2. The ownership of the property can be held in either equal shares or unequal shares.

A purchase as Tenants in Common means that the ownership can be in accordance with the contribution for the purchase, regardless of whether the contribution is equal or not.

For example: Anne, Rob and Graham purchase a property for $1,000,000. Anne contributes $500,000, Rob contributes $300,000 and Graham contributes $200,000.

As Tenants in Common in unequal shares the property can be held

  • 5 out of 10 shares by Anne;
  • 3 out of 10 shares by Rob; and
  • 2 out of 10 shares in Graham.
Tenants in Common

If Anne died she could gift her share in the property to any other person.

You and your co-owner own individual shares in the property. These shares do not need to be equal. You both can sell, borrow against or leave your respective shares to other people in your Will without the consent of the other owner(s).

It will not automatically pass to the survivor on the death of either of you.

Anyone. Family, friends, colleagues or even an investment consortium.

By selling, borrowing against or leaving your share to someone else in your Will.

Your interest in the property does not automatically go to the other party when you die.

If you and your co-owner have paid unequal amounts towards the purchase price, this will be noted on the Certificate of Title.

This arrangement can attract tax implications.

If your relationship with your co-owner breaks down.

This can increase legal fees as a grant of Probate will be required to transfer the interest to your beneficiary.

It is important when purchasing a property as tenants in common that you have a plan for what will happen should you no longer wish to own the property. Owners should consider entering into a Deed of Agreement to document the manner in which they hold the property, how the agreement is going to come to an end and what will happen in the event that a dispute arises between the owners.

What should a good co-ownership agreement include?

If you intend on buying a property with someone else, it is wise to enter into a co-ownership agreement. This document will generally set out:

  1. What your arrangement is;
  2. Who contributed what (e.g. you contributed $50,000 and the other party contributed $1,000,000 towards the purchase price);
  3. What the process is if you or your co-owner want to buy each other out;
  4. How mortgages, utilities and other property-related expenses will be split between you;
  5. How tenants can be approved;
  6. What happens if your relationship breaks down, you cannot meet your debts or one of you becomes bankrupt.
Wills for blended families

When drawing up a co-ownership agreement, a good solicitor will run you through the advantages and disadvantages of joint ownership.

They will also advise you on whether this arrangement is right for you, and that you should probably see an accountant to understand the financial implications before co-owning property.

Can I change the way I co-own a property after I purchase it?

After you purchase a property, you are able to change your co-ownership agreement from a joint tenancy to tenants in common.

However, doing so may attract:

  1. stamp duty which is calculated on the market value of the share being transferred; and
  2. legal fees as a new co-ownership agreement and Transfer severing a joint tenancy or Transfer Altering Tenancy will need to be entered into and lodged with NSW Land Registry Services.

It is essential that you choose the right type of co-ownership and document your agreement to combat issues that may arise in the future. If you are in need of a co-ownership agreement or just want to ask some questions, we can put you on the right path.

If you want to know about joint tenants, tenants in common, or Conveyancing in general, please contact the team at ALA Law.

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