When you co-own property with others as joint tenants, the ownership structure includes a right of survivorship. This means that upon your passing, your share of the property automatically transfers to the surviving joint tenants, regardless of the instructions in your will. However, you can change this arrangement by severing the joint tenancy. This process converts the ownership structure to tenants-in-common, allowing you to leave your portion of the property to anyone you choose, rather than the other co-owners.
How Can You Sever a Joint Tenancy?
To sever a joint tenancy, you must first confirm that the property is held as joint tenants, as indicated on the title deed. The process involves preparing and lodging specific documents with the Department of Lands, instructing the Registrar General to change the ownership structure from joint tenants to tenants-in-common.
Key points to note:
- No stamp duty is payable, provided your ownership share remains unchanged.
- Severance can be completed without the consent of the other co-owners.
- The tenancy and shares of other registered proprietors not holding as joint tenants with the transferors remain unaffected.
The severance process typically involves completing an electronic Transfer Severing Joint Tenancy form under section 97 of the Real Property Act 1900. This form is used when one or more joint tenants, but not all, transfer their interest to themselves to hold as tenants in common in equal shares.
Why Might You Want to Sever a Joint Tenancy?
There are several reasons why severing a joint tenancy might be beneficial:
Control Over Your Share
If you prefer your share of the property to pass to someone other than the surviving co-owners upon your death, severing the joint tenancy allows you to specify this in your will.
Inheritance Preferences
For example, if you inherited property with siblings as joint tenants but wish for your share to go to your spouse or children, severing the joint tenancy ensures your wishes are honoured.
Blended Families
If you own property with a current spouse or partner but have children from a previous relationship, severing the joint tenancy allows you to provide for your children in your will.
Separation or Divorce
After separating from a spouse or partner, severing the joint tenancy ensures your share of the property does not automatically transfer to them upon your death.
Steps to Sever a Joint Tenancy
To sever a joint tenancy, you will need to:
- Complete a Transfer Severing Joint Tenancy form and lodge it with the NSW Land Registry Service.
- Notify the other joint tenants of the severance. The NSW Land Registry Service will issue a severance notice to the other joint tenants, and the transfer will not be registered until 30 days after the notice or upon receipt of their consent.
- Ensure the transferor/transferee (the registered proprietor initiating the severance) is represented in the electronic workspace for the dealing form.
- Provide notice of the severance to all joint tenants in the joint tenancy as soon as practicable after the joint tenancy has been severed under Section 30 of the Conveyancing Act 1919.
Consequences of Severing a Joint Tenancy
Severing a joint tenancy changes the ownership structure but does not affect the overall entitlement to the property. For example, if you and your partner sever the joint tenancy, you will each hold a 50% share as tenants in common. However, this does not determine your entitlement under the Family Law Act 1975. Property division in family law matters is subject to negotiation, documentation, and court orders.
- If one of the joint tenants passes away after lodging the form but before registration, the severance will not proceed (as established in McCoy v Estate of Peter Anthony Caelli (2008) 13 BPR 25,515; [2008] NSWSC 986). In these circumstances, the form should be withdrawn.
- Severance cannot be applied to joint tenants holding property in a fiduciary capacity.
- Ministerial consent is not required for this type of dealing.
Family Law Implications:
- Severing a joint tenancy is often advisable during family law proceedings to protect your interest in the property should you pass away before the settlement is finalised.
- While severance ensures your share does not automatically transfer to your former partner, it does not impact the ultimate division of property in family law matters. Consent Orders or court rulings will dictate how the property is dealt with.
Severing a joint tenancy is a practical step for property owners who wish to control the distribution of their share of the property or safeguard their interests during family law proceedings. Whether you are planning for inheritance, navigating a separation, or simply seeking greater control over your assets, severance provides flexibility and peace of mind.
If you are considering severing a joint tenancy, ensure you understand the process and its implications. Consulting with a Catron Simmons Lawyers to help you navigate the requirements and ensure your interests are protected.