One of the questions I ask clients when taking their instructions for a Will is “how do you own your property- Joint tenants or Tenants in Common”? 

The most common answer is “jointly”.

But there are two very different types of joint ownership with very different consequences on death.

The time to decide which type of ownership is appropriate is when you are about to purchase property with another person.  At the time of signing the Contract, you will be asked whether you wish to purchase as joint tenants in common.

Here is an explanation of the difference between holding property as joint tenants and tenants in common:

Joint Tenants

The purchase of property as joint tenants is most common where parties are contemplating marriage, are married or in a de facto relationship. This form of ownership can be described as co-ownership, where each joint tenant owns the property in its entirety and not simply a portion or share of it.  As such the joint tenants have an equal interest in the property and are entitled equally to income generated and any proceeds if the property is sold.  There can be 2 or more joint tenants.

Owning a property as a joint tenants means that on your death, the property passes by survivorship to the remaining joint tenant(s).  You cannot pass your share of the property to another person.   As a joint tenant you cannot encumber or sell your share of the property, as you and the other joint tenant(s) own the property in its entirety and jointly.

If you hold property as a joint tenant, you can easily and unilaterally sever the joint tenancy and turn it into a tenancy in common. However seek legal advice prior to taking this action to understand the implications and consequences of such action.

Tenancy in Common

Tenants in common hold a specific share of the property.

Each tenant in common can do as they please with their share of the property.

You can sell or transfer it to another, you can leave your share to a beneficiary in your Will and you can mortgage it and this will not affect the tenancy of the other tenants in common.

You hold a share of the property either as a percentage or a fraction or a decimal as agreed between you and the other tenants in common based upon usually, although not always, your contribution to the acquisition of the property.

Often couples who have been married before and have children from their previous marriage will purchase their home as tenants in common so that each partner can will their share of the property to their children.  If this is to occur, then the couple will need to consider what will happen to the surviving spouse who may wish to continue living in the home after the death of their partner.  A right of occupation is one solution, but may not suit every circumstance.

If you are thinking about buying real property with another person, you will need to consider which option is most appropriate for you.  It is important to obtain legal advice before entering into a Contract, as the consequences of choosing the wrong option can be devastating.