Guide to Property Co-ownership: Manner of Holding
When you decide to purchase a property with somebody else, you will need to consider how your ownership will be registered on the title of that property. That is to say, you will need to elect your manner of holding. The two most common forms of co-ownership are joint tenancy or tenancy in common.
Joint Tenants
Joint tenants of a property are co-owners who share the same interest in the property in undivided shares. This means that if person A owns a property with person B as joint tenants, person A owns 100% of that property together with person B.
Tenants in Common
Tenants in common are co-owners who each own distinct and separable shares in the property. These shares can be equal or unequal. For example, person A can own 10 of 50 shares in a property, whilst Person B owns 40 of 50 shares in the same property. Alternatively, person A and person B can each own 25 of 50 shares.
Tenants in common have full autonomy over their share of the property and can deal with it as they wish. This includes any decision to sell or transfer their share to a third party.
The Rule of Survivorship
For the purposes of a purchaser, the most significant difference between the two forms of ownership relates to how the property is dealt with upon the death of an owner.
The rule of survivorship applies to joint tenancy arrangements. This means that upon the death of a joint tenant, their ownership in the property will automatically pass to the surviving owner. This will occur regardless of any contrary intention in the will of the deceased owner. For example, imagine that Person A, Person B and Person C own a property as joint tenants. If Person A dies, then Person A’s share of the property will automatically vest in person B and C in undivided shares. Person A cannot decide what will happen to their share of the property in their will.
Conversely, the rule of survivorship does not apply to tenants in common. Tenants in common can sell, gift or devise of their share in the property however they wish. When a tenant in common dies, their share in the property forms part of their estate and will be dealt with according to their will or the relevant intestacy laws.
How can we help you?
Unless you specify otherwise, the law assumes that where there is more than one purchaser, the purchase will be a joint tenancy. However, as outlined above, the type of co-ownership you elect for your purchase may have significant consequences in the future.
When purchasing a property, it is imperative that you choose a form of ownership that is suited to your circumstances and your needs.
To discuss what type of co-ownership may be right for you, please contact our property and conveyancing team on 03 9645 9500 or via email.
Author, Danielle Murphy.
