Tenants in Common vs Joint Tenants: The Definitive Guide
- May 1, 2022
- Posted by: admin
- Categories: Conveyancing, Family Law, Wills and Estates
Tenants in Common vs Joint Tenants
In Australia, how a property is owned is defined by what is noted on the Certificate of Title. When two or more people buy a property together, an election is made as to how they will own the property.
Types of Property ownership in Tasmania
The two main types of ownership in Tasmania (and Australia generally) are owning as joint tenants or tenants in common. This article will explain the differences between the two.
If two people own a property as joint tenants, they are treated as owning property jointly. Each of them is jointly entitled to the whole of the land and they are both listed on title and taken as owning the property in equal shares.
For tax purposes, such as Capital Gains Tax and any profits from rent, it is assumed by the tax office that joint tenants own 50% of the property. For more information about tax and types of ownership see the ATO’s website here.
Tenants in Common
If two or more people own a property as tenants in common, they can nominate what share of ownership they each take in the property. Each co-owner has a separate interest in the property. This is useful for investors or where people contribute different portions of the purchase price and wish for the ownership to reflect the contributions I.e., 70% to 30% ownership.
Owning as tenants in common allows each party to deal with security for mortgages separately and protect their share if the other party defaults on any debts secured against the property.
Tenants in Common often choose to enter into a Co-Ownership Agreement which sets out:
- how the property is to be managed;
- what happens if there is a dispute;
- when the property can be sold;
- How one person can sell their share;
- whether the property is to be invested or lived in by one owner; and
- use of income or payment of expenses.
If you are interested in a Co-Ownership Agreement then we can assist you.
If you wish to transfer your share of the property to another person, that transfer will be subject to stamp duty as would any other transfer of property unless you are eligible for an exemption such as in the case of a relationship breakdown.
What is the difference between tenants in common and joint tenants?
There are two common circumstances where ownership becomes an issue:
1. Drafting a Will, or dealing with an estate after someone passes;
2. Following a family breakdown.
Wills & Estates
Where a property is owned by two people as joint tenants and one passes away, the deceased’s ownership of the property automatically flows to the surviving owner. This means that your ownership of the property does not form part of a will.
Where a property is owned as tenants in common then each share is separate and ownership can be gifted as part of a will after the owner passes away. Most couples purchase property as joint tenants expecting the property to flow to their partner if they pass away, however it’s important to think about your specific situation.
Blended families or couples who buy later in life often decide to purchase as tenants in common. This gives them the ability to reflect their different financial contributions and gift their ownership to their children, who may not be related to their partner, when they pass away.
Contact us for advice on how the ownership of your property may affect your ability to gift it in your will.
It is common for parties who are separating to “sever” their joint tenancies. This is a cheap and straightforward process and can be completed by one owner without the consent of the other.
Severing a joint tenancy changes the ownership to tenants in common allowing owners to be seen as separate. It ensures that if either person pre-decease the other, or passes away before any formal property settlement, then each person’s share of the property forms part of their will rather than automatically transferring to the survivor.
Advocate Lawyers are experienced family lawyers and you can read more about our services here.
For more information contact one of our lawyers for an initial consultation.