What is Joint Tenancy and Tenants in Common?

October 19, 2017

How can the different forms of tenancy on a title provide comfort or cause angst on the death of a joint owner: “joint tenants” and “tenants in common”?

If you are buying a property jointly with someone else, you can choose to hold it together either as “joint tenants” or “tenants-in-common”. The way in which you hold the title will have a significant impact in the event of the death of one of the joint owners.

Joint Tenants – Survivor takes all

If you hold property as “joint tenants”, each owner has an equal interest in the property. On the death of one of the owners, the property will automatically pass to the surviving joint tenant. The property will not form part of the deceased owner’s estate and therefore cannot be gifted under their will.

Purchasing a property as “joint tenants” is a common way for married couples to hold their home to ensure it will automatically become the property of the surviving spouse on the death of one of them with little fuss.

Tenants in Common – Look to the will

If a property is held as “tenants-in-common”, the owners can have an equal or unequal interest in the property. Tenants-in-common allows for the property to be held in proportions that might reflect the different amounts contributed to the property or expected to be received on a sale of the property.

Unlike joint tenants, on the death of a tenant in common the deceased’s share of the property will not pass to the other joint owner, but will pass in accordance with the deceased’s will, if they have one, or the rules of intestacy if they die without a valid will.

Tenants-in-common is a popular way to hold property if owned by family members or blended families. For example, siblings may purchase an investment property together but, ultimately, they want the benefit of their interest to go to their children and not the surviving sibling on their death.

Obtain advice to get the best outcome

When purchasing a property, it is important to consider the 2 tenancy alternatives and get advice so that you can choose the form of ownership that best suits your needs.

For example, if you want the flexibility of using testamentary trusts in your will, you would need to hold as tenants in common to prevent the deceased’s share atomically passing to the survivor.

If you wanted to make sure that a challenge to your will did not prevent property passing to the other joint owner, you should hold the property as joint tenants.

You should be aware that any joint tenant, or their attorney if the joint tenant has lost capacity, can ‘sever’ the joint tenancy at any time, meaning you would then hold as tenants in common. You may need to get advice as to how best to manage this risk.

For any existing property, it is worth reviewing how this is held to make sure it is in line with your wishes. This can be done by doing a simple $20 title search.

If you hold property in a tenancy which does not reflect your wishes, this tenancy can be changed at any time prior to the death of either owner of the property.

For further information, please contact our conveyancing manager Jo Thompson.