When you purchase a property, there are two primary ways to determine ownership: as joint tenants or as tenants in common. It is not a simple question to determine which category of ownership to choose, and selecting the incorrect or inappropriate one can have significant implications in the event of death, changes in ownership, or a breakdown in the ownership relationship.
What is a Joint Tenant?
Simply put, it means that the owners or “registered proprietor” (generally two but can be more) own the property jointly. Should either of the “registered proprietors die, then the property is automatically transferred to the surviving registered proprietor(s). In other words, the property does not become a part of the deceased’s estate. This can, in some cases, mean that the executor does not have to go through probate or letters of administration, depending on the size of the estate.
This is common among married couples, as ownership will pass to the surviving spouse.
Can a Joint Tenancy be severed?
Yes, a joint tenancy can be severed with NSW Land Registry Services. This will result in the tenancy being severed and each party will be converted into a tenancy in common in equal shares. A severance can be unilateral and does not require the consent of the other party, or it can be mutual, with the permission of both parties.
What is a tenant in common?
It means that the owners or “registered proprietor” own shares in the property. The shares do not have to be even, for instance, 50/50, 70/30, or any combination, as long as they add up to 100%. On the death of a registered proprietor, the ‘share’ forms part of the deceased’s estate and must be determined by an existing will or estate legislation.
This is more common where parties have contributed unequal shares in the property and the owners want that to be reflected in the ownership, or where a relationship is new or a blended family, as it is easier to dispose of ownership under this form.
You should always consider the financial and tax implications of either and consult your financial advisors.
Some Examples of Property Ownership
Married Couple
William and Tara are married and own a property together as joint tenants. Tara is involved in a car accident and passes away. Williams is then able to have the property transferred into his sole name by producing a copy of Tara’s Death Certificate and relevant forms to the Land Registry Services.
Couple in a New Relationship
William and Tara have only been together for a few months, and they decided to purchase a new home together. They bought as tenants in common, each with a 50% ownership interest. William dies in a skydiving accident a few years later. The property is then dealt with according to Tara’s will.
Blended Family
William and Tara are in a relationship, but both have children from previous relationships. They want to be able to provide for their children in death with the home being their most significant asset. They purchase the property as tenants in common, so that if either Williams or Tara dies, the property shares are then distributed according to their respective wills.
Investment
William and Blake are two brothers. Each wants to get a foot on the property ladder and decides to ‘go in together’ to buy a property. The brothers are able to purchase the property outright and William has 70% of the money. The brothers purchase as tenants in common, with William having a 70% share and Blake having a 30% share.
For most, the purchase of a property is the most significant decision of your life. Ensure to get appropriate legal advice.
This article does not constitute legal advice.