Purchasing property with another person is a big decision. So, you must make sure you own the property correctly.
In property, there are two types of ownership, Joint Tenancy, and Tenants in Common.
They can sound similar, but they have different legal and financial effects on the rights of the registered proprietors.
There are two main differences:
Joint Tenancy
When parties own the property at Joint Tenants, it means that:
- Joint tenants have equal ownership and interest in the property.
- The right of survivorship applies.
When the right of survivorship applies, this means that when one owner dies and the joint tenancy has not been severed*, the property as a whole will pass to the surviving owner. This happens regardless of the deceased owner’s Will or testamentary intentions. It is important to understand how you want your share of the property to be owned so that it avoids any disputes in the future.
Married or long-term couples usually own land jointly, which means that the survivor automatically owns the whole of the land upon the death of the spouse or partner.
When you are purchasing property with another person, unless you specify otherwise, the law assumes that you are purchasing the property as Joint Tenants.
*Joint tenancies can be severed unilaterally so that the consent of the joint tenant is not required.
Ending a Joint Tenancy
Ending a Joint Tenancy will happen in the following circumstances:
- When the property is sold to a third party.
- When Joint Tenant owner A transfers their interest to Joint Tenant owner B. This would mean that Joint Tenant B would become the sole owner of the property and own the property in full.
- When one of the Joint Tenants unilaterally severs the Joint Tenancy. This can sometimes be done to protect the interest of one of the Joint Tenants if there has been a breakdown of a relationship. This generally requires a Court Order in Victoria.
When the share of the property is being transferred, all owners will need to sign the relevant transfer forms and will need to specify moving forward whether they would like to be noted on Title as Joint Tenants or for their ownership to be as Tenants in Common.
Tenants in Common
When parties own the property as Tenants in Common, there can be more than two owners and the share of the property can be equally or unequally divided. This means that one party can own 25% of the property, while the other party can own 75% of the property.
The split in the ownership can be decided by the parties when purchasing the property or if they have inherited a percentage of a property with other parties.
A Tenant in Common can sell their % interest or shares in the property or give them away in a Will when they die. If one of the Tenants in Common dies, the other Tenants in Common do not automatically receive the deceased’s share. Further the remaining owners will still own their original interest or shares.
Choosing Tenants in Common is usually appropriate in the following cases:
- Purchasers who are not married couples usually choose to own land as Tenants in Common.
- People who contribute different amounts to the purchase and ownership of the property.
- Investors who buy property together.
In Short:
Joint Tenants
When you own a property as a Joint Tenant, each owner holds an undivided equal share in the whole of the property and a right of survivorship exists.
Right of Survivorship
The Right of Survivorship means that the property will automatically pass to the surviving owner if one owner dies. This will happen regardless of the deceased owner’s Will or testamentary intentions.
Tenants in Common
When the property is owned as Tenants in Common the share of the property can be equal or unequal. (eg. 40/60, 70/30 or 20/20/20/40. Each owner can dispose of their share of the property as they wish.
