How do you share ownership of a property with another?

2017-02-01
Understand how your own property ownership is structured so you know how it affects your own circumstances. Understand how your own property ownership is structured so you know how it affects your own circumstances.

There are many ways to own property with other people

Different ownership structures bring different rights and responsibilities so it makes sense to understand the basics.

When a single property is owned by more than one person (or company) it can be owned either as;

  • joint tenants or
  • tenants in common

Jump Ahead

Owning a property as joint tenants

Under the joint tenant's ownership structure, each owner effectively owns the whole asset. In other words, each owner shares ownership equally.

  • You could say they each own 100% of the property equally together.

What happens to the property if one of the joint tenant owners dies?

  • If one owner dies, the other owner receives ownership of the deceased owner’s portion automatically regardless of what may be written in the will of the owner who died.
  • Commonly used for a people in relationships together.

Owning a property as tenants in common

Under the tenants in common ownership structure where two (or more) people own an asset as tenants in common, each owner holds their own share of the asset outright. This can be an unequal percentage.  For example,

  • Two owners could together own 60% and 40% respectively.

What happens to the property if one of the tenants in common owners die?

  • If one owner dies, their portion of the property can be left in their will to any individual they choose (and their portion can even be sold to someone - other than the owner of the other portion).
  • It's important to understand - it doesn't automatically pass to the remaining owner.
  • This ownership structure might be used by siblings or friends investing together.

Ownership can be changed as your circumstances change

The joint tenant ownership structure be changed

If a joint tenancy is converted to a tenancy in common, each owner can then direct how their share in the property is dealt with in their will.

Changing an ownership structure between existing owners

As there is no change in ownership of the property, transfer duty and tax are not payable. The only transaction cost is generally Government registration fees. You can learn more about that at the Department of Land and Property.

Common life examples

Property owned by siblings where one later marries

John and his sister Julie, bought an investment property together as joint tenants before either of them were married.

  • After his marriage, John changed the ownership structure to a tenancy in common so that upon his death, his portion of the interest in the property would pass to his new wife rather than automatically to his sister.

Protecting the home from business risks

David and Tracy live in NSW and purchased their family home as joint tenants. A few years later, Tracy established a business and became concerned about losing everything if her business failed.

  • While David is alive, Tracy wants the house to be owned primarily in Davids name because of the risks involved with running a business.
  • Should David pass away, she wanted it to remain in a testamentary trust shielded from potential any creditors.

David and Tracy decided to sever the joint tenancy ownership structure and convert it to tenants in common so that David can direct his portion of the property be transferred to a trust under his will.

Summary

The difference in property ownership structures can have far-reaching (and often surprising) effects on their owners. 

These can include issues about;

  • restrictions on applying for a mortgage
  • using a portion of equity in the property for another property purchase
  • helping a child with a deposit
  • creditors and bankruptcy issues
  • your will and estate plans.

All these issues change depending upon whether the ownership is structured as joint tenants or as tenants in common. You need to know how your own property ownership is structured and make sure it's appropriate for your own circumstances.

Drew Browne

Drew specialises in helping people protect and provide for what matters most in their lives. He's an award-winning writer, speaker, financial adviser and business strategy mentor. His company Sapience Financial and Investment Services is committed to using business solutions for good in the community, and in 2015 certified as a B Corp. In 2017 Drew was recognised in the inaugural Australian Westpac Businesses of Tomorrow national awards. Drew writes for successful Small Business Owners and Entrepreneurs at Smallville, his blogs can be read on Amazon.com and you can connect with him on LinkedIn.

drew browne pic

Drew Browne

Sapience Founder & Director.
Simplifying Financial Complexity

Be the first to know!
Get our monthly 
Not-a-Newsletter

If you like it share it

Download our Free eGuide # 31 Good Money Habits

Download our latest Free eGuide

Download our Free eGuide # 7 Financial Decisions for Same-sex Newlyweds

Download our latest Free eGuide

Download our Free eGuide # 31 Families Lose a Parent Every Day

Download our Free eGuide # 31 Families Lose a Parent Every Day

Find us in The Better Business Book on Kindle

The Better Business Book Vol 3

Learn about Our Process

Every good decision follows a deliberate process and framework. This is how we approach our thinking.

Proress and strategy help make great fianncial decisions

11 Key risks every Australian should know

Know Your Risk

Know Your Risks

So what are the chances of...
Click to read more...

Our Connections

We're connected to every Life Insurance company in Australia

That means we can give you the best available option

Why this should matter to you

  • AMP
  • AIA
  • BT
  • TAL
  • CommInsure
  • MLC
  • Zurich
  • One Path
  • Macquarie
  • Asteron
  • Clear View
  • NEOS