Reading time: 4 minutes

People commonly purchase property together. This is a big step, so it is important to consider the division of ownership. In property law, there are two types of ownership:

  1. joint tenancy; and
  2. tenants in common.

At first glance, these terms sound similar. However, they have different legal and financial effects on the rights of the registered proprietor should one of the parties exit the property ownership, either by death or by selling the property. This article explains the differences between a joint tenancy and tenants in common.

Joint Tenancy

When parties own property as joint tenants, this means that:

  • all joint tenants have equal ownership and interest in the property; and
  • a right of survivorship exists.

The right of survivorship means that if one of the joint tenants dies, the property will automatically pass to the surviving joint tenant. This happens regardless of any contrary intentions in the will of the deceased. Therefore, it is important to consider the way a property is owned when preparing wills and an estate plan.

Commonly, joint tenants are husband and wife or couples in long-term relationships. However, this type of property ownership can also be used for other property ownership arrangements where all parties are content with the right of survivorship. Unless you specify otherwise when you are purchasing the property, the law assumes that your purchase is a joint tenancy.

Commonly, joint tenants are husband and wife. However, this type of property ownership can also be used for other property ownership arrangements.

Ending a Joint Tenancy

The joint tenancy will come to an end in the following circumstances:

  • when the property is sold to a third party;
  • when joint tenant A transfers their interest to joint tenant B (meaning joint tenant B owns the property in full); or
  • when one of the joint tenants unilaterally severs the joint tenancy (this can be done to protect the interest of one of the joint tenants in the case of a relationship breakdown).

A joint tenancy can be severed when one or more of the joint tenants (but not all of the joint tenants), transfers all their interest in the property. This transfer does not affect the shares of a registered joint tenant who is not part of this transfer.

This is done by completing the relevant form through the authoritative government body. For example, in New South Wales you can find this form at the Land Registry Services. However, all owners will need to sign this transfer form.

A tenant in common can sell their shares in the property or give them away in a will. This means that there is no right of survivorship.

Ownership as tenants in common is usual for people with adult children entering second marriages, people who contribute very different amounts towards the purchase of a property or investors buying property together.

Key Takeaways

There are essential differences between a joint tenancy and tenants in common. They will especially effect what happens when one person wants to sell their interest in the property. Therefore, before you take the leap, speak with your property lawyer who can provide advice on:

  • the best form of ownership for you; and
  • the effect on estate planning or selling the property in the future.

There are also significant tax differences between joint tenancy and tenants in common arrangements. Therefore, you should also consult your accountant or financial advisor about the tax and other financial implications of each type of ownership.

Frequently Asked Questions

What Are Joint Tenants?

When parties own property as joint tenants, all tenants have equal ownership and interest in the property and a right of survivorship exists.

What is the Right of Survivorship?

The right of survivorship means that if one of the joint tenants dies, the property will automatically pass to the surviving joint tenant. This happens regardless of any contrary intentions in the will of the deceased.

What Are Tenants in Common?

Tenants in common co-own a property in defined shares (e.g. 40/60) that they can dispose of as they wish. The shares owned by each tenant in common can be equal or unequal.

Webinars

How to Recover Unpaid Invoices

Thursday 13 May | 11:00 - 11:45am

Online
What do you do if your customers don't pay your invoices? Attend this webinar to learn about how to recover unpaid invoices.
Register Now

About LegalVision: LegalVision is a tech-driven, full-service commercial law firm that uses technology to deliver a faster, better quality and more cost-effective client experience.

The majority of our clients are LVConnect members. By becoming a member, you can stay ahead of legal issues while staying on top of costs. From just $119 per week, get all your contracts sorted, trade marks registered and questions answered by experienced business lawyers.

Learn more about LVConnect

  • 2020 Excellence in Technology & Innovation – Finalist – Australasian Law Awards 2020 Excellence in Technology & Innovation Finalist – Australasian Law Awards
  • 2020 Employer of Choice – Winner – Australasian Lawyer 2020 Employer of Choice Winner – Australasian Lawyer
  • 2020 Fastest Growing Law Firm - Financial Times APAC 500 2020 Fastest Growing Law Firm - Financial Times APAC 500
  • 2020 AFR Fast 100 List - Australian Financial Review 2020 AFR Fast 100 List - Australian Financial Review
  • 2020 Law Firm of the Year Finalist - Australasian Law Awards 2020 Law Firm of the Year Finalist - Australasian Law Awards
  • Most Innovative Law Firm - 2019 Australasian Lawyer 2019 Most Innovative Firm - Australasian Lawyer