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Joint Tenancy vs Tenants in Common

In today’s competitive property market, it is becoming increasingly common for partners, friends and family members to purchase property together in order to break into the market.
Where there is more than one purchaser of a property, the type of ownership is registered on the Certificate of Title at the time of purchase. This determines the way in which each owner holds their share of the property, and affects the way in which each owner’s share can be used or disposed of.
The two classifications of ownership of property are either as joint tenants, or as tenants in common.
This article will look at the differences between these two options, and why it is important to make the right choice to suit your needs, in order to avoid unwanted consequences down the track.

What is Joint Tenancy?

When owners hold a property as joint tenants, they each have an undivided equal share in the whole of the land. In the event that one of the joint tenants dies, their share automatically passes to the other owner by what is called the right of survivorship. Their share does not form part of their estate, and therefore cannot be transferred to their beneficiaries in accordance with their Will.

There are “four unities” which must be fulfilled for ownership of a property to be considered a joint tenancy, which are as follows:

  1. Unity of Possession – both owners must have possession of the whole property. If each owner only inhabits their own section of the property, or only one owner actually lives at the property, this is not a joint tenancy.

  1. Unity of Interest – ownership of the property must be in equal shares. Any words which specify different shares for each owner, indicate a tenancy in common.

  1. Unity of Title – each owner’s interest must be granted pursuant to the same transaction or instrument, such as by the same transfer or deed.

  1. Unity of Time – each owner must take their interest at the same time. For example, in a Will which specifies that multiple children will take their share upon reaching a certain age, presumably they will not all do this at the same time, and unity of time will not exist.

Joint tenancy is most common in the context of married partners or those in long-term relationships, where most assets are already shared, and each owner is happy for their entire share of the property to automatically pass to their partner in the event of their death, without it needing to be dealt with as part of their estate.

It is important to note that the law assumes at the time of purchase that ownership will be as joint tenants, unless otherwise specified.

What are Tenants in Common?

When owners hold a property as tenants in common, they each hold a defined share that can be expressed as a percentage ratio – for example it can be 50/50, but could also be 60/40, or even 99/1, depending on what is agreed between the owners. 

There is no right of survivorship in a tenancy in common – when one owner dies, their share passes according to their Will, or if they have no Will, according to the laws of intestacy. Their share can also be sold, transferred, or otherwise dealt with, without altering the share of the other tenant in common.

This is however limited by the requirement that the dealing does not interfere with the interest of the other owner. For example, an owner with a 40% share may seek to grant an interest to a third party through a lease or mortgage, or subdivide their share of the property, but they can only do this if there is agreement between all owners, insofar as these dealings affect the other owners’ rights to possess and use the whole property.

Likewise, if a tenant in common wishes to sell the property, or their share of it, this requires agreement between the tenants in common. If no agreement is possible, each state and territory has different property laws, which normally require application to the relevant court or tribunal requesting an order for the property to be partitioned, or to force the sale of the whole property.

Tenancy in common is usually a more suitable option for investors, or where owners have contributed unequally to the purchase price, or in any situation where the owners prefer that their share be able to be dealt with separately, and be disposed of according to their wishes.

Differences between Joint Tenancy and Tenants in Common

Joint TenancyTenants in Common
Undivided equal share in whole of land

Right of survivorship – share passes to other owner upon death

Individual shares cannot be dealt with separately

Tax liability in equal shares
Shares defined by percentage

No right of survivorship – share passes according to Will or laws of intestacy

Each individual share can be dealt with separately

Tax liability according to percentage of ownership

It is important to note that there are different tax implications of each type of ownership, and you should therefore seek financial advice in order to select the option which best suits your specific needs.

It is also possible to end or sever a joint tenancy, either by:

  • Selling the property to a third party;
  • One joint tenant (A) transfers their share to the other joint tenant (B), resulting in exclusive ownership of the property by B; or
  • The joint tenancy is severed by one or more of the joint tenants. 

This can be done either:

  • Legally, by registering the transfer of a share to each joint tenant on the Certificate of Title, thereby creating a tenancy in common; or
  • In Equity, through conduct which expresses a deliberate intention to divide the property.

Frequently Asked Questions

Which is best, joint tenancy, or tenants in common?

Neither of these options is inherently better, but should be assessed according to your specific needs. Joint tenancy is automatically assumed by law unless otherwise specified, and is generally used by couples who are happy for their share to pass automatically to their partner.  Tenants in common is generally more suitable for investors, or where owners have contributed unevenly to the purchase price.

What is the Right of Survivorship?

The right of survivorship is an attribute of co-ownership of property as joint tenants, which means that upon the death of one joint tenant, their share in the property automatically passes to the other owner, and does not form part of their estate.

Joint Tenancy and Taxes

Given that in a joint tenancy, each owner has an equal share, their tax liability is also divided evenly. As tenants in common, each owner’s liability is based on their ownership share. It is important to seek financial advice when deciding which type of ownership to register for the property, as there are other tax implications of co-ownership which could affect your choice.

Looking for more information to assist you with purchasing a property?

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