Co-ownership: ‘Joint Tenants’ vs ‘Tenants
in Common’ – What’s the difference???
When two or more
people buy a property (real property, i.e. land, with or without a built
structure) you will be asked by your lawyer how you wish to hold that property. You will choose either ‘Joint Tenants’ or ‘Tenants
in Common’.
So, what’s the
difference? The key difference is what happens upon the
death of one of the co-owners as set out below:
Joint Tenants: If you hold as ‘Joint Tenants’, each co-owner
has a right to the whole of the property, shared equally with the other
co-owners. When one joint tenant dies,
the other surviving joint tenant becomes the sole owner (or if there are two or
more survivors they continue to hold as ‘Joint Tenants’ between themselves). This happens automatically! Regardless of what it says in your Will, the
property will pass to the surviving joint tenant (or joint tenants). Under the current law in Queensland, not even
a person who contests a Will by a family provision application can interfere
with this! Most married couples hold as ‘Joint
Tenants’.
Tenants in
Common: This
option allows co-owners to nominate their respective share in
the property. The shares do not need to
be equal. For example, 15%/35%/50%, is
an acceptable way for ‘Tenants in Common’ to hold a property (but this is not
possible as ‘Joint Tenants’). Further, on
death, a co-owner’s distinct share forms part of their estate and can be left
via his or her Will. Most business partners or
investors hold as ‘Tenants in Common’.
Can the type of tenancy be changed? Usually, yes, but it is easier
and more cost-effective to get it right from the start. A change from ‘Joint Tenants’ to ‘Tenants in
Common’ is quite common (and is often done after a couple separates or divorces). This can be
done by agreement between all co-owners or by one co-owner even if the other
(or others) don’t agree. ‘Tenants in
Common’ can also be changed to ‘Joint Tenants’, but only if all co-owners agree
to do so.
So, when buying real
property with another person (or persons), be sure you make a conscious
decision as to how you wish to hold the property. Happy property investing to you all! Till
next time… Foxlaw out :)