tenants in common

Severing a joint tenancy

If you own real property with others, then it is either held as “joint tenants” or as “tenants in common“. For more information on the difference between both, please click here.

Assuming land is held jointly, on your death it will pass to the surviving joint tenant/s regardless of what you state in your Will. This is known as the “right of survivorship” and it operates because each joint owner of the property owns the whole of the land at the same time as the others, so the deceased owner simply drops off the title leaving the remaining joint tenants on title. This isn’t automatic as the land registry needs to have the details of the death to update the register, but it is a relatively simple process.

Joint tenancy may be a suitable scenario for a husband and wife where the survivor expects to retain the house however, generally joint tenancy is not suitable for investments as the investors would want their family or beneficiaries to inherit their interest in the property on their death, rather then their co-owners on title. From an estate planning perspective, tenants in common would generally be more sensible in this situation.

Property is sometimes incorrectly held as joint tenants because, for example:

  • people inherit property from their parents jointly with siblings, but they intend for their own children to inherit it on their deaths, rather than it staying with their surviving siblings;
  • sometimes purchasers just don’t understand the difference or don’t take advice at the time of acquiring a property (or the advice they got was wrong); or
  • they have divorced or separated and not taken any steps to separate their assets, update their property interests or estate planning arrangements

however, this is not a massive problem provided that they identify the issue and seek to rectify it without delay;

You can sever a joint tenancy. Severing a joint tenancy changes the nature of ownership so you and your co-owners own the land as tenants in common, which allows you to leave your share of the property to anyone in your Will (or if you don’t have a Will, under the laws of intestacy).

NSW Land Registry Services allows joint tenancies to be severed (converted to tenants in common) either unilaterally or with the consent of the other joint owners.

No stamp duty is payable in such a severance.

FURTHER INFORMATION

For further information in relation, please contact McKillop Legal on (02) 9521 2455 or email help@mckilloplegal.com.au 

This information is general only and is not a substitute for proper legal advice. Please contact McKillop Legal to discuss your needs.

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in Business / Commercial Law / Dispute Resolution / Estate Planning / General / Property / Risk management  by 01 Jul 2023 0 comments

Buying a property with others: Co-Ownership Agreements

Given the increasing cost of buying real estate, many potential purchasers are having to pool their resources to buy property together.

This can be good for many reasons as the costs can be shared and you may be able to own or live in better premises than you may otherwise be able to afford on your own, but there are risks.

Co-ownership often is a joyful experience at the beginning but often, disputes can arise such as each co-owner has differing views on the approach to be taken on various matters, from the important to the quite petty.

If you have bought, or are thinking of buying, a property with others, then you should really have a Co-Ownership Agreement in place.

Co-Ownership Agreements often cover the following maters (and others):

  • Ownership proportions
  • Amounts contributed for acquisition costs
  • How improvements to the property are made
  • Agreed valuation mechanism for exit purposes
  • Rights of first refusal / pre-emption
  • Parts of the property / premises either co-owner may have exclusive use of (and those for common use)
  • Contributions to expenses (insurance, rates, utilities etc)
  • Responsibilities for tasks like mowing, maintenance, upkeep etc
  • Dispute resolution procedures
  • Estate planning considerations (for example a couple’s interest may be held as joint tenants, rather than tenants in common).

Other articles of interest regarding this topic include:

FURTHER INFORMATION

For further information on co-ownership of property and the benefits of Co-Ownership Agreements, please contact McKillop Legal on (02) 9521 2455 or email help@mckilloplegal.com.au 

This information is general only and is not a substitute for proper legal advice. Please contact McKillop Legal to discuss your needs.

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in Asset Protection / Dispute Resolution / Estate Planning / General / Property / Risk management  by 01 Jun 2022 0 comments

The difference between joint tenants and tenants in common

You own property with another person and you are in the process of making a Will.

Of course, you want your interest in the property to go to your intended beneficiaries.

Your solicitor asks you if you own the property as “joint tenants” or as “tenants in common“. You stop and think…

Until now, you had no idea that there was any difference between joint tenants and tenants in common and had probably never considered it.

The concepts are the same for any asset, but are more commonly used in relation to land. So what is the difference?

What is tenants in common?

The simplest way to think about owning real estate (or real property) as tenants in common is that each owner has a legal interest in the land in a defined or specific share or proportion.

For example, the phrase “as tenants in common in equal shares” means that each owner has an equal interest in the land (so in the case of 2 owners, they each hold a 50% interest and in the case of 3 owners, they each hold a 1/3 interest).

Where property is owned as tenants in common but in unequal shares, the proportion of ownership is specifically stated (such as “John Smith as to 1/4 share and Bob Brown as to 3/4 share as tenants in common”).

With tenants in common, each owner (subject of course to any Co-Ownership Agreement or encumbrance such as a Mortgage or Caveat) may freely transfer or dispose of their share of the property, including in their Will when they die.

On their death, their interest in the property will be included in the inventory of property annexed to the grant of Probate or if they don’t have a Will, annexed to the grant of Letters of Administration.

What does joint tenancy mean?

Joint tenants however each own the whole of the relevant asset. The concept is that the co-owners’ ownership of the asset overlaps such that on the death of one joint tenant, the remaining joint tenant/s will continue to hold the whole of the asset. This is known as the “right of survivorship“.

A deceased joint tenant’s interest in the property does not form part of their estate and is not available for distribution to the beneficiaries of that person’s Will. Often this is overlooked by those drafting Wills.

The same principles apply to bank accounts held jointly.

It is for this reason that most married couples (or those in longer term relationships) hold their property or at least their principal place of residence as joint tenants. There are however, sometimes good reasons for holding property differently as part of an overall Estate Plan. Blended families for example often necessitate this right of survivorship not being given effect to so as to more fairly distribute their estate on their death.

Other situations where a joint tenancy may be appropriate for those not in a relationship like marriage is a Lease by parties to a Partnership – the death of one partner would then not necessarily affect the continuation of the Lease.

Severing a joint tenancy

If you hold property as joint tenants with another person it is possible to sever the joint tenancy – which then converts it to a tenancy in common in equal shares.

This can be done unilaterally by lodging the appropriate documentation at NSW Land Registry Services (formerly NSW Land & Property Information and the Land Titles Office) and is often done by lawyers when parties to a marriage or de facto relationship no longer wish for the other party to own the entire property on their death, such as when they separate or get divorced.

Mixed tenancies

It is also possible to have a combination of both a “joint tenancy” and a “tenancy in common“, such as where a property is owned by 2 families. For example,  a husband and wife may own one half of the land but they own it jointly as between them (so that if one passes away, the other continues to own it) and the brother of the husband owns the other half absolutely.

The title to the property would show “John Smith and Mary Smith as joint tenants as to 50% and David Smith as to 50% as tenants in common”.

FURTHER INFORMATION

Craig Pryor is principal solicitor at McKillop Legal. For further information in relation to estate planning, changing the tenancy of a property or documenting a co-habitation or property use agreement, contact Craig Pryor on (02) 9521 2455 or email craig@mckilloplegal.com.au.

This information is general only and is not a substitute for proper legal advice. Please contact McKillop Legal to discuss your needs.

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in Asset Protection / Estate Planning / General / Property  by 01 Nov 2018 0 comments