When you purchase real estate with a partner or spouse there are two ways in which your ownership of the property may be described: you can hold the property either as joint tenants, or as tenants in common.
The way in which you own the property, as stated in the contract for sale, will then determine how your interest in the property will be affected in the event of a relationship breakdown or the death of one of the parties.
Unfortunately, many couples do not give enough thought as to how they would like to own a property with their partner/spouse. If you are considering buying a property with your partner or spouse, you may want to discuss your ownership options first, before the excitement of the purchase process takes over!
Joint Tenancy
If you own a property as joint tenants, it means that you own the whole property together. If one joint tenant dies then the surviving joint tenant owns the whole of the property. As a consequence of his/her death, the deceased joint tenant no longer has an interest in the property. Their interest in the property does not form part of the deceased estate and it is not available for distribution to the beneficiaries of the deceased’s will.
It is common for husband and wife to own a property as joint tenants though this is not always appropriate. A joint tenancy may also be used where a property is held in trust or in certain business situations.
Tenancy in Common
Tenants in common each own their individual share in the property absolutely. They may hold their respective shares equally or in some other proportion. Where a person owns an interest in a property as tenants in common with another owner, then upon the death of that person his/her estate continues to have an interest in the property.
The deceased’s interest in the property will pass according to the provisions of the deceased’s will or, in the absence of a legal will, in accordance with the rules of intestacy.
A tenancy in common may be the preferred way for a couple to own property if there are children of prior relationships whose interests have to be protected. It is quite common for de facto couples and for investors buying property together to own their property in this way.
Severing a Joint Tenancy
If you own a property as joint tenants with another person it is possible unilaterally to sever the joint tenancy and convert it into a tenancy in common in equal shares.
This is done by lodging a form at the Land & Property Management Authority. The other owner of the property, and any mortgagee, are notified that the form has been lodged and are given the opportunity to object. In there is no objection to the change, the joint tenancy is severed. This procedure is particularly useful for a person who might be leaving a marriage or de facto relationship and no longer wishes his or her spouse to become the sole owner of the property in the event of their death.
For further information on property ownership and the subsequent family law implications, contact one of our dedicated family lawyers on ph: 02 9635 6422.