Purchasing as Joint Tenants or Tenants in Common in NSW

When buying property in New South Wales (NSW), one of the most critical decisions to make is how the ownership will be structured. Two common forms of property ownership in NSW are Joint Tenancy and Tenancy in Common. Each type of ownership comes with its own set of rights and implications for the co-owners and each type of ownership is handled differently if one of the owners were to pass away.

1. Joint Tenancy

Joint Tenancy is a form of co-ownership where each party owns an undivided and equal interest in the whole property.  Under Joint Tenancy, the owners collectively own the entire property rather than specific portions of it.   It is particularly suitable for married couples or de-facto spouses.

Key features of the Joint Tenancy model include:

a. Right of Survivorship

One of the most significant benefits of Joint Tenancy is the right of survivorship. This means that if one co-owner passes away, their share will automatically transfer to the remaining co-owner/s, regardless of what is stated in their will. This process continues until only one owner remains, who then becomes the sole owner of the property.

b. Equal Shares

Under Joint Tenancy, each co-owner has an equal share in the property. For instance, in the case of two co-owners, they would each have a 50% share.

c. Right to Transfer

Spouses that own property together as a Joint Tenancy can only sell or transfer their ownership to the other spouse (for example in the case of a family law settlement).However, if one party wishes to transfer their share of the property to anyone else, it cannot be done under a Joint Tenancy Agreement.

d. No Testamentary Freedom

Joint Tenants cannot leave their share of the property to someone else in their Will. Upon their death, it passes to the surviving co-owner(s).

2. Tenancy in Common

Tenancy in Common, on the other hand, is a co-ownership arrangement where each owner holds a distinct and separate share of the property. Unlike Joint Tenancy, the shares need not be equal and can be divided in any proportion as agreed upon by the owners.

The key features of Tenancy in Common include:

a. No Right of Survivorship

In Tenancy in Common, the right of survivorship does not apply. If one co-owner passes away, their share of the property will be distributed according to their Will or the rules of intestacy if they die without a Will. This means that they have testamentary freedom to decide who inherits their share of the property.

b. Unequal Shares

Co-owners in Tenancy in Common can hold different-sized shares of the property. For instance, one owner might hold a 30% share, while another holds a 70% share.This might be used when parents assist a child in purchasing a property for example or if two or more friends purchase the property together but bring different amounts of money to the agreement.

c. Right to Transfer

Unlike Joint Tenancy, Tenants in Common have the right to sell, transfer, or gift their share to someone else during their lifetime.

d. No Restriction on Beneficiaries.

Each co-owner has the freedom to decide who will inherit their share of the property through a Will.

Choosing the Right Ownership Structure

Deciding between Joint Tenancy and Tenancy in Common largely depends on the co-owners' preferences and objectives. Joint Tenancy is often chosen by spouses or de-facto partners who wish to simplify the transfer of ownership if one of them passes away. It ensures that the surviving co-owner(s) automatically become the sole owner(s) without the need for probate.

Tenancy in Common is preferred when co-owners have unequal financial contributions to the property or want to have more control over their share's disposition upon their death. It can also be more appropriate in the case of blended families and business partners or investors who want clear arrangements for their respective shares.

Understanding the differences between Joint Tenancy and Tenancy in Common is crucial for property buyers. Speak to an experienced lawyer before purchasing to ensure that you are making an informed decision!  For advice on purchasing property speak to the Lamrocks property and conveyancing team on ph: 02 4731 5688.