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.
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.