Joint Tenants or Tenants in Common; which one?

Are you purchasing a property with a friend or family member? Whether you’re a first home buyer, seasoned investor, or a member of a blended family, understanding your manner of holding options is an important consideration for any purchaser.

If a property is purchased by one individual/entity, the property will be held by a ‘Sole Proprietor’. As illustrated below in example (1), when a Sole Proprietor dies, the property will pass according to their Will.

When a property is purchased by two or more individuals/entities, it can be held as ‘Joint Tenants’ or ‘Tenants in Common’. Whether the property is held as Joint Tenants or Tenants in Common will determine what happens on the death of one of the Registered Proprietors, or the eventual sale of the property.

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Joint Tenants:

By owning a property as Joint Tenants, the property will be owned jointly, with each owner having equal rights to the whole of the property. When an owner passes away, the property will be left to the surviving proprietor, regardless of what the deceased’s Will says.

This option is attractive and common for married or de-facto couples who are comfortable with the other owner receiving the entire asset when they die.

In example (2) below, Alex and Morgan own their property as joint proprietors. When Alex dies, the property will be solely owned by Morgan.

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Tenants in Common:

The second option to co-own a property is as Tenants in Common. By owning a property as Tenants in Common, each person owns a defined share, equal or unequal, in the property.

This manner of holding is a more flexible ownership option, as it allows for an individual share to transferred, sold, or gifted through a Will. This may be more desirable for friends, blended families and investors.

Example (3) demonstrates where Alex and Morgan each own 1 of 2 equal shares (50%) in the property as Tenants in Common.

Example (4) is similar, however in this example the shares are unequal. With Alex owning 1 of 4 shares (25%) and Morgan owning 3 of the 4 shares (75%).

In both of above examples, when Alex dies, Morgans share in the property remains the same. However, Alex’s share, whether this be 50% or 25%, will distribute according to their Will.

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A mixture of the two:

If three or more people own a property together, then there are even more options.  A property can be owned as Tenants in Common with the individual shares owned as Joint Tenants. This is demonstrated in example (5).

In this example, there are two shares in the property. Alex and Morgan own 1 of 2 shares (50%) of the property jointly. The other share (50%) is held by Jesse and Riley jointly. A practical example of this arrangement could be where two couples purchase an investment property together.

In this arrangement, when Alex dies, their 50% share owned jointly with Morgan will pass solely to Morgan. Jesse and Riley’s 50% share in the property will remain the same. But now, Morgan will own the other 50% entirely, as demonstrated in example (6).  

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Extra considerations when Tenants in Common is chosen:

Although owning a property as Tenants in Common provides more flexibility than Joint Tenants, there are some downsides depending on your individual circumstances. If you are interested in Purchasing a property as Tenants in Common, we highly recommend reaching out to a member of our experienced Property Law team to discuss your options. Such as discussing an ‘Tenants in Common Agreement’.

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Contact our experienced and friendly property team to discuss your conveyancing transaction and allow us to guide you through the sometimes-daunting process.  You can email us anytime at reception@wakefieldlawyers.com.au or call during business hours 03 5623 5166.

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Disclaimer: The information in this post is general in nature. This does not constitute legal advice and should not be relied on as such. Please contact one of our Lawyers if you are seeking advice about a specific legal matter.

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