What are Joint tenants and tenants in common ? If you and your partner have just thought about purchasing a property or are in the process of purchasing a property this is a question you will need to know the answer to. When you review your contract with your conveyancer you will be asked if you would like to purchase your property as Joint tenants or tenants in common. Most people are not aware of this until the appointment and do not realise the implications of their choice. We at Coutts endeavour to help you make the best choice for your current circumstances ensuring you have an easy transaction from beginning to end. As like every person, buying a property is quite complex and it can be a stressful period. One of the biggest decisions you both have to make is whether you wish to buy the property as Joint Tenants, Tenants in Common in equal shares or Tenants in Common in unequal shares. In this article I will describe to you the differences between joint tenants and tenants in common.
It is important to pick your shares earlier on in the purchasing transaction. During your Contract Review with your Solicitor or Licensed Conveyancer they will describe the difference. This article is going to give you a clear understanding on the differences and describe what these mean in "layman" terms so that any persons, purchasing a property can make an easier decision prior to signing on the dotted line.
It is important to understand, discuss and decide on your shares prior to completion date, as if you make the wrong decision it will cost time and money to amend your shares later on down the track. It is not impossible to change your shareshowever, choosing the most suitable option early on will save you time and money and protect your best interests.
Usually, married couples are joint tenants. They own 50% of the property each. This means that if one party was to die the share he/she hadat the time of death can be transferred to the surviving partner. Therefore one person would have the whole 100% share.
One thing most people don't know about Joint Tenants is that you cannot "leave" your share to another person. For example if you and your de facto are joint tenants and you pass away you can't leave your share to your children regardless of the terms of your will. Your share will be left automatically to your de facto partner. It is up to them whether they choose to leave part of the property to your children when they pass away.
Tenants in Common in equal Shares
Tenants in Common in equal shares are normally made by couples who purchase who are not married. This means that yourself and your partner own 50% of the property each and if one of the partners were to pass away their 50% share will be left in accordance with the terms of their Will. This is becoming more common with second time around partnerships and couples with children to previous marriages.
It is very important that if you select to be a tenant in common that you prepare a Will immediately. In the Will you can set out how you wish for your 50% share to be divided. So, what does this mean for your partner who is left behind? It means that the people who are entitled to your share can force your surviving partner to sell the property to obtain your share of the property.
I have in previous years seen where this is an issue. An elderly person has been made to sell the property because step children wanted to sell the property to obtain their share of their parents half of the house. In this case we can create a life estate later on to protect the interest of an elderly person to ensure that they can live in the property until such time as they pass away or decide to move on.
Tenants in common in unequal shares
This is the same principal as above the only difference being on how many shares you own.
For example Brother and Sister are purchasing a property. Property is worth $1,000,000. The brother puts in $800,000 of his savings and sister puts in the remaining $200,000 into the property. As you can see the brother contributed 80% of the purchaseprice and the sister contributed 20% of the purchase price. Both wish to be tenants in common in unequal shares. Therefore, they will own the property as "brother as to 80/100 shares and Sister as to 20/100 shares".
As long as the shares add up to the value of 100th or 10th you can have as many people purchasing or as many shares as decided.
Given the rising prices of housing in all of Sydney many parents are choosing to either go guarantor on the children's property or even putting large sums of money towards their children's home. To protect their interest many parents are added onto the Contract and onto the deeds. An example where we can mix joint tenants and tenants in common is: husband and wife buy property, dad contributed a large some of money towards the purchase. Husband and wife own the property as joint tenants 50% and dad owns other half of the property, 50% as a tenant in common. This means that if the husband was to pass his share will automatically go to his wife. However, if the father passes away his 50% share would be distributed as per the terms of his will. If at any stage the husband and wife want to purchase back the fathers 50% then husband and wife would have to obtain a valuation from a registered property valuer and pay 50% stamp duty on the value of the property.
As you see from the examples whenbuying a property things can get quite complex. So ensure that you have discussed these matters with your partner prior to signing on the dotted line. If you would like any more information about your shares in a property please contact Coutts Solicitors & Conveyancers on 1300 268 887.