Property ownership in Australia is becoming increasingly more expensive. With a rapid rise in property prices, more first-time homeowners are turning to different ownership options. Two of the most popular options are joint tenancy vs tenancy in common.
In Australia, each of these arrangements includes different legal and financial terms for tenants. These are important to understand if one of the tenants leaves the property due to death or loses the capacity to make decisions.
What is joint tenancy?
Joint tenancy is a type of property ownership that gives equal interest to each person listed on the property title. In this type of property ownership, the right of survivorship exists. For example, if one of the joint tenants dies, the property goes to the surviving joint tenant.
The right of survivorship in joint tenancy means that regardless of the deceased tenant's will, it will still go to the surviving tenant. Therefore, it is important to consider how you own your property when planning your estate and writing your will.
Joint tenancy is common for married or de facto partnerships because these relationships typically share ownership of assets of all types of property. In addition, unless you specify otherwise when purchasing property, the law assumes that your purchase is a joint tenancy.
When does a joint tenancy end?
Severing a joint tenancy agreement can be challenging. Depending on the circumstances, it could eventually need lawyers. Some examples can include:
- When the tenants sell the property
- When one of the joint tenants transfers their share of the property to the other joint tenant
- Forced sale or partition if co-owners can’t come to an agreement
When getting into a joint tenancy agreement with the right of survivorship, it’s important to choose someone you trust. Ultimately, this person should also have your best wishes in mind when becoming part of the joint tenancy.
What is tenancy in common?
Tenancy in common is a popular type of property ownership that means two or more people co-own property in defined shares. The shares owned in a tenancy in common can be equal or unequal. For example, you can own 99% of the shares, and your co-owner can own 1%.
Unlike joint tenancy, there is no right to survivorship in a tenancy in common. If one of the owners dies, the other tenants in common shares in the property don’t change. Therefore, each tenant can choose to sell their shares or give them away in their will.
Tenancy in common is typical for co-owners who contribute varying amounts to purchase a property or investors who buy property together. Regardless, each party can choose how to dispose of their shares.
There are pros and cons to joint tenancy vs tenancy in common. It’s important to understand your rights as a co-owner in these types of property ownership in Australia. Whatever type of homeownership you choose, make sure to keep your will up to date with new assets.
To learn more about estate planning and writing your Will, visit Willed’s in-depth guide library for preparing your estate.
Disclaimer: The content of this blog is intended to provide a general guide to the subject matter. This blog should not be relied upon as legal, financial, accounting or tax advice.