If you are considering purchasing a property with another person, it is important that you understand how you will own that land. When more than one buyer is involved, you will have the option to elect to be either joint tenants or tenants in common.

Though these terms may sound similar, each of these agreements confer different rights and interests upon owners. Regardless of whether you are buying property with a partner, family member or friend, determining which type of ownership is right for you before purchasing property can prevent substantial legal and financial difficulty in the long run.

It is critical that you decide how to hold the property before you sign a contract, as any change can incur further stamp duty at the normal rates. It is possible to transfer from one name into joint names as spouse and it will be exempt from stamp duty. However, the same opportunity to does not apply to the reverse for a transfer from joint names into one name only. You might do this for asset protection purposes because that person is at risk of creditors in a trading company.

The Differences between Joint Tenancy and Tenants in Common

Joint tenancy is where two or more people jointly and equally own property together rather than a quantified share of it. At law, joint tenants are recognised as the single owner of the property. This type of arrangement is common between married or long-term couples.

As it is not possible to separate each tenant’s share, there are limited circumstances in which joint tenancy agreements can come to an end. Such circumstances include but are not limited to where the property is sold to a third party, or where one joint tenant transfers their interest in the property to another person. On the death of one joint tenant, the property “vests” automatically in the surviving person. All that is required is to record the death on title and the property will be in the sole name of the survivor. This is an important step as you cannot sell the property unless and until it is in the correct name.

In contrast, tenants in common own separate and distinct shares of a single property.  These shares may be equal or unequal. For example, one tenant in common may own a 10% share of the property, while the other owns the remaining 90%. These shares may be disposed of as each owner chooses. Though each owner will own a portion share of the property, the land is not physically divided between them. Rather, each tenant in common is entitled to full physical possession of the land.

However, the key difference between these arrangements concerns what happens to the property after one owner passes away. In this situation, if a property is owned by joint tenants, the deceased’s interest in the property is transferred to the surviving tenants. The property does not become an asset of the deceased’s estate. This is called the “right of survivorship”.

In a tenant in common arrangement however, no such right of survivorship exists. Instead, the property will become an asset of the deceased’s estate. As a result, the deceased owner’s share must be transferred only to the beneficiary of the estate or be otherwise dealt with by the estate’s legal representative.

Due to these essential differences in your rights as owner, it is important to ensure you enter into the ownership arrangement that is right for you.

At Perspective Law, we can assist you to evaluate your circumstances and make sure that you are entering an arrangement tailored to your needs. Should you be interested in our advice or more information, please contact us for an obligation free discussion (07) 3839 7555.