Purchasing a property is a significant milestone for many individuals and families. However, owning a property includes many crucial decisions, one of which is how the ownership will be structured. In Queensland, two common options are available: holding the property as joint tenants or tenants in common.
Each option carries distinct legal implications that can impact property rights, inheritance, and financial security.
What are Joint Tenants and Tenants in Common?
Before diving in, it's important to understand the fundamental differences between joint tenants and tenants in common:
Joint tenants have an equal share in the property, and have the equal, undivided right to keep or dispose of the property.
They have the right of survivorship, meaning that if one joint tenant passes away, their share automatically transfers to the surviving owner/s.
The property cannot be bequeathed to anyone else in a Will.
Tenants in Common
Tenants in common can hold unequal shares in the property (e.g., 50-50, 70-30, 99-1).
Each tenant in common can bequeath their share to their chosen beneficiaries in their Will.
There is no right of survivorship, meaning that if a tenant in common passes away, their share does not automatically transfer to the other tenant(s) but instead forms part of their estate.
Holding Property as Joint Tenants
Whilst we often see joint tenancy amongst couples, there are a number of key considerations to bear in mind:
Right of Survivorship One of the most significant features of joint tenancy is the right of survivorship. This means that if one co-owner passes away, their share automatically transfers to the surviving co-owner(s). This happens outside of the deceased's will or estate planning, ensuring a seamless transition of ownership. It's important to note that this right applies even if the deceased's will states otherwise. Joint tenancy is most suitable for a couple who intends to live together and who want the property to go automatically to their partner upon their death.
No Right to Bequeath Property In Your Will Since joint tenancy comes with the right of survivorship, co-owners cannot bequeath their share of the property to someone else. Upon their death, their share automatically transfers to the surviving owner/s. This can sometimes lead to unintended consequences if proper estate planning isn't undertaken, particularly in situations where co-owners have different intentions or wishes for the property.
Severing Joint Tenancy It is possible for a joint tenancy to be severed, converting it into a tenancy in common. This might be done for estate planning purposes or to accommodate changing circumstances among co-owners. Severing joint tenancy requires specific legal procedures and documentation, and we always recommend seeking advice relevant to your unique situation.
Legal and Financial Implications Choosing joint tenancy can have significant legal and financial implications. For example, a creditor of one co-owner may be able to place a lien on the entire property, which may affect the other co-owners.
Holding Property as Tenants in Common
Lack of Right of Survivorship One of the significant implications of not holding property as joint tenants is the absence of the right of survivorship. This means that if one owner passes away, their share will not automatically transfer to the other owner/s. The deceased's share will instead be distributed according to their Will or intestacy laws if there is no Will. This can result in complexities and potential disputes, especially if the deceased's beneficiaries and co-owners have differing interests.
Unequal Financial Contributions In cases where co-owners contribute varying amounts to the property's purchase or maintenance, holding the property as joint tenants might not be equitable. A tenancy in common can be more appropriate as it enables proportional shares, reflecting the financial contributions of each owner.
Dissolution of Co-ownership If co-owners decide to dissolve their co-ownership, the process can be more straightforward for tenants in common. Each tenant in common can sell or transfer their individual share independently.
Legal and Financial Implications If one of the co-owners goes into bankruptcy or is otherwise sued, their share of the property can be seized by creditors. In a tenancy in common, the creditor can only seize the debtor’s share, not the whole of the property. In addition, under a tenancy in common, one co-owner can sell or mortgage their share of the property without the consent of the other owners. Always seek specialist financial advice and legal advice before disposing of property to ensure you understand the implications of any decision.
Deciding how to hold property can have significant implications on property rights, inheritance, and estate planning. While joint tenancy offers simplicity and the right of survivorship, tenants in common allow for more flexibility in estate distribution and proportional ownership.
It is crucial for property buyers to consider their unique circumstances, financial arrangements, and long-term goals when choosing the most appropriate ownership structure. Seeking legal advice and discussing options with co-owners can help ensure a well-informed decision that aligns with their interests and future plans. Don't hesitate to contact our experienced team if you have any questions.
Disclaimer: This publication is not intended to be comprehensive, nor does it constitute legal advice. We are unable to ensure the information is current and there is no guarantee in relation to accuracy. You should seek legal or other professional advice before acting or relying on any of the content of this publication. The views and/or opinions expressed in this publication is that of the author and may not necessarily represent the views and/or opinions of RHC Solicitors.
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