Written by: Natashia Blank
Buying your first home or investment property is an exciting, yet daunting milestone for many Australians.
Whilst some save a deposit and finance their way to a successful purchase, other young and budding investors turn to family and friends to assist in making their home-ownership dreams a reality.
But before you buy property with a family member, friend, or life-partner, one of the decisions you’ll need to make is how you will hold your interest in the property: Joint Tenancy or Tenants in Common.
Depending on your situation, one of these ownership structures may work better for you. Keep reading to learn which one is best suited to your property partnership.
Joint Tenants vs Tenancy in Common
If you choose to co-own property, you can hold your interest either pursuant to a Joint Tenancy with the other party/s or as Tenants in Common.
Your property rights and responsibilities may differ significantly depending on which one you choose, so it is important to understand and consider the respective pros and cons carefully before signing a contract.
Joint Tenants
Joint Tenants hold equal, undivided shares in property.
When one co-owner dies, their share automatically passes to the surviving owners. This is called the “right of survivorship.”
Joint tenancy can be beneficial for estate planning purposes, particularly for married couples or partners who want to ensure that the surviving partner automatically inherits the property upon the other’s death.
Tenants in Common
Co-owners that hold separate, transferable shares in real property, hold their interest as a Tenant in Common with the other co-owners.
Tenants in Common shares may be equal or unequal (e.g., Margaret owns 60% share, while Harry owns 40%).
The “right of survivorship” does not apply to interests in property held as Tenants in Common.
When a co-owner dies, the surviving co-owner retains only their original share and does not automatically inherit the deceased’s portion, unlike in a Joint Tenancy. Instead, the deceased’s share passes to the beneficiaries of their estate (as specified in their Will or according to the laws of intestacy).
3 Questions to help you decide on a tenancy agreement
- Who will be living in the property?
- If it is an investment property, how will the expenses and income be managed?
- What happens when one co-owner wants to sell or wants to buy the other out?
These are all matters that may cause unnecessary stress or legal action in a family/business relationship if they are not discussed and settled on at the start.
We encourage our clients to carefully consider how they structure their co-ownership arrangements to ensure future contingencies are able to be navigated and resolved with minimal stress and expense.
Need assistance with a property purchase?
If you are looking at purchasing a home with your family, friends, business partners of otherwise, we encourage you to consider getting quality legal advice at the outset.
The team at Greenhalgh Pickard are experienced, professional, and happy to discuss your options with you regarding your property purchase. Whether you’re considering purchasing a property with a friend, have already signed a contract or need to speak with a commercial dispute lawyer, give our team a call to discuss your future in the property market.
Disclaimer:
The information contained in this article is for general informational purposes only and is not intended to provide legal advice or substitute for the advice of a professional. This information does not consider your personal circumstances and may not reflect the most current legal developments. Should you need advice, please contact our firm for targeted information relating to personal your situation.
Greenhalgh Pickard’s Litigation Team
