Joint Tenants vs Tenants in Common

– YOU ASK WE ANSWER –

CO-OWNERSHIP

If you and your spouse or partner, family member or friend are proposing to buy a home or investment property together, you will need to carefully consider the legal implications of the method of co-ownership you chose to adopt. Basically, there are two alternatives: joint tenancy and tenancy in common. A clear understanding of these features and differences can be particularly important in some situations such as:

de facto couples purchasing a property together, especially when they will provide unequal financial contributions;
when one (or both) intending co-buyer(s) has been previously married and has children from that earlier relationship; or
family members or friends intending to buy a property together, whether as a residence or an investment.
It is often a good idea to review the provisions of your will (or making one if you have not previously made a will) when entering into one of the above arrangements. If you decide, after properly considering your position, to buy the property as joint tenants, then your will is not directly affected as far as the property is concerned, as the property passes by law to the surviving joint tenant automatically, regardless of what your will says. However, even if you buy as joint tenants, you should still consider the impact on your overall asset position, from an estate-planning perspective. If in any doubt about the consequences, you should consult an experienced solicitor.

FEATURES OF CO-OWNERSHIP

Tenants in Common

The interest in the land of each tenant in common is separate and distinct from the other.
The interest can be equal half shares each or any other shares (eg. it may be 1/3rd for one and 2/3rd for the other or it may be 1/100th for one and 99/100th for the other).
There can be several owners as tenants in common all with different shares.
All tenants in common are entitled to physical possession of the whole property.
Tenants in common can each deal with third parties as to their share as a separate owner, generally without the need for other co-owner’s consent (unless they have a co-ownership agreement in place).
Tenants in common can acquire their interests at different times and from different people.
Each tenant in common is free to sell or otherwise deal with their interest in a property at anytime (unless there is in place a co-ownership agreement which contains terms restricting this).

Joint Tenancy

The interest of each joint tenant is not separate or distinct from the other. Each is entitled to an undivided interest in the whole property – that is, they each own the whole.
There are no separate shares as each owns an undivided part of the whole.
There can be more than 2 owners as joint tenants but none will own a distinct share.
All joint tenants are entitled to physical possession of the whole property.
In dealing with third parties joint tenants must act as a single owner.
Joint tenants must acquire the property at the same time from the same person.
Generally each joint tenant can only act at the same time as the other one. They must act together. Any independent dealing with the property by one joint tenant is likely to result in the “severing” (or ending) of the joint tenancy, effectively converting the co-ownership relationship to a tenancy in common.

SURVIVORSHIP – MAIN PRACTICAL DIFFERENCE

Tenants in Common

The interest of a tenant in common can be left under that person’s will and forms part of their estate. If a tenant in common dies without a will that person’s interest will pass under his estate under the rules of intestacy. On the death of one of two tenants in common the survivor retains their interest and the decease’s interest passes with his Will. There is no automatic transfer to the other. The tenancy in common continues.

Joint Tenancy

On the death of one joint tenant that person’s title or interest in the property automatically passes to the surviving joint tenant by operation of law. Therefore, where a couple own land as joint tenants and one decides to leave his or her interest under a Will to their child this will not be possible as the survivorship principle over-rides the Will. The interest of that person will automatically pass to the spouse on that person’s death. When we say, automatically, the LPI still requires a form called a Notice of Death, referring to the Death Certificate issued by the Registry of Births, Deaths and Marriages, to be lodged with a registration fee, in order to change the title records, but this is only a formality. On the death of one of two joint tenants the survivor becomes the sole owner of the property and there is no longer a joint tenancy.