Jasmine Cario and Nicholas Kyriakoudes
Joint Tenants or Tenants in Common – What is the difference?
Generally, an asset which is owned at the time of your death as “joint tenants” will not form part of your estate and therefore, will not distributed pursuant to the terms of your Will. Rather, the asset held as joint tenants will be transferred to the surviving joint tenant on your death. This is because each joint tenant who has an interest in property held jointly has a right to survivorship. This right allows the interest of the surviving joint tenant to be enlarged upon the death of another joint tenant.
For example, if A and B own a property as joint tenants and A dies, A’s share of the property will be transferred to B after death, even if A’s Will leaves their estate to another person who is not person B. In this case, person B benefits from having a right to survivorship as they will receive A’s interest in the property when person A dies, regardless of the testamentary intentions of A.
Given the implications of the right of survivorship you should carefully consider how you hold significant assets with other entities and people, such as real property. For example, whilst it may be appropriate and common for spouses to purchase property as joint tenants knowing that if they die, their share in the property will automatically pass to their spouse, holding property with a business partner as joint tenants is likely to be inappropriate. This is because the right of survivorship would preclude the beneficiaries you have nominated in your will from receiving that property on your death which would pass to that business partner (whom you are unlikely to want them to receive that benefit).
If you wish for your interest in real estate to be divided amongst the beneficiaries of your Will after your death (rather than to the other owners of the real estate) you should purchase your property as tenants in common or, if you have already purchased a property with another as joint tenants, the joint tenancy should be severed or altered.
Ways to sever or alter a joint tenancy
There are two ways in which we can change the tenancy type from joint tenants to tenants in common in respect of real estate owned by more than one person. This can be achieved by:
1. Registering a “Transfer Severing Joint Tenancy” with the NSW Land Registry Service – this Transfer only requires one owner to sign.
If this Transfer is registered with the NSW Land Registry Service, the NSW Land Registry Service will notify the other joint tenant/s in writing before theTransfer is registered. The consent of all joint tenants registered on title is not required for this Transfer to be lodged and registered.
2. Registering a “Transfer Altering Tenancy” with the NSW Land Registry Service– this Transfer requires all joint tenants to sign (all owners registered on title).
A Transfer Altering Tenancy will normally be registered with the NSW Land Registry Service quicker as there is no need for the NSW Land Registry Service to notify the other property owners.
If a Transfer Severing Joint Tenancy or a Transfer Altering Tenancy is registered, the ownership of the property will change from joint tenants to tenants in common and, thereafter, your share in the property will form part of your estate after you die and shall be distributed pursuant to the terms of your Will.
If you would like advice as to purchasing property or the implications of purchasing property as a joint tenant or tenant in common then feel free to contact us on 42 222 666 or by email at firstname.lastname@example.org