Where property is owned by 2 or more people, there are two ways in which their ownership may be described. They can hold the property as joint tenants or as tenants in common. But why does it make any difference?
Joint tenancy
The owners as joint tenants own the whole of the property. If one of the joint tenants dies then the law provides that the surviving joint tenant acquires the interest of the deceased joint tenant and therefore owns the whole of the property. Accordingly, if a joint tenant dies then they no longer have an interest in the property and that interest in the property they previously had, does not form part of the deceased’s estate and cannot be distributed to the beneficiaries of their Will or to their next of kin if they have no Will.
The advantages of a joint tenancy is that, the joint owners may wish to leave to the surviving joint tenant their interest in the property after they die and also the requirements and cost of transferring an interest in property to a surviving joint tenant is less than the cost of transferring an interest held as a tenant in common. It is very common for a husband and wife to own a property as joint tenants although this is not always appropriate in all circumstances. If an owner of property wants to ensure that their portion of the property is left to a designated person after they die, unless the designated person is their only joint owner of the property, they should not own the property as joint tenants but rather as tenants in common.
Tenancy in common
Tenants in common each own their individual share in the property absolutely. Their respective share in the property may be equal to the other joint tenant/s or in some other proportion, for example 60:40%. If a person owns an interest in a property as a tenant in common with another owner, then upon the death of that person his/her estate continues to have an interest in the property. The deceased’s interest in the property will be transferred to the beneficiaries of the deceased owner’s Will or if there is no Will then in accordance with the rules of intestacy.
Tenancy in common is preferred way for owners to own property where they want to retain the right to leave their interest in the property to whoever they desire. It is quite common for investors buying property together to own the property as tenants in common and insure that their interest in the property passes after their death to the persons they wish to inherit their interest.
Severing the joint tenancy
If the owners of a property own it as joint tenants, it is possible to sever the joint tenancy unilaterally and to convert the ownership of the property to tenancy in common in equal shares. This is done by registering at Land & Property Information Office a form. The other owner of the property and any mortgagee is then notified that this form has been lodged and given an opportunity to object. In the absence of an objection then the joint tenancy is severed and brought to an end and the change noted on the register at the Land Titles Office. This procedure is useful when a person leaves a marriage or defacto relationship and no longer wishes their spouse or defacto spouse to acquire their interest in the property in the event of their death.
Property applicable
NSW law (Section 26 Conveyancing Act) now presumes in the absence of any evidence to the contrary, that when two or more people acquire property whether it is real property or personal property such as a car, they acquire that property as tenants in common and not as joint tenants.
If you have any concerns about whether you own property as joint tenants or as a tenant in common or if you wish to sever a joint tenancy, please contact Kerry Kyriakoudes, Anna Masi or Mark Nolan of our Property Law Team.