Joint tenants v tenants in common – what is the difference

Joint tenants v tenants in common – what is the difference?

How many people reading this article own real estate with another person? If you do, do you know if you own the property as joint tenants or as tenants in common?

Unfortunately, people are often not aware of the difference in these types of property ownership when they complete the contract to purchase the property, particularly in cases where properties are purchased at an auction, and this can have some serious consequences.

Joint tenants own the property jointly, as the name suggests, in equal shares. If one of the owners pass away, the surviving joint tenant becomes the sole owner of the property subject to filing some paperwork with NSW Land Registry Services to remove the other name from the title. Many people do not realise that if you are a joint tenant, you cannot distribute of your share of the property in your will.

Tenants in common however own the property in their respective shares which do not need to equal. For example, there could be two registered owners on the tile of the property, but one owns a 60% share and the other a 40% share. Because a tenant in common owns a specified share of the property they can nominate who will receive their share in their will. This is most often utilised in blended family situations where each owner may want to leave their share of the property to children from a previous relationship rather than their current partner.

It is common practice for joint tenancy to be the default position in the purchase contract if there is more than one purchaser. In most cases, this is exactly what the purchasers intended. But I have also had plenty of clients come to see me to prepare a will only to find out that they cannot nominate who receives their share of the property in their will because they are a joint tenant. It can be an expensive mistake if the tenancy needs to be changed after a property purchase has been completed. There could be stamp duty payable if a transfer altering the joint tenancy to tenants in common changes the ownership into unequal shares. There are filing fees to lodge a transfer to change the tenancy on a Certificate of Title. If there is a mortgage registered on the title, the bank may also need to consent to any changes.

If you are considering purchasing property, make sure you seek appropriate legal advice before you agree to exchange contracts with the other party. If you do not understand the legal terminology in the contract (trust me, there is plenty!) ask your solicitor to explain it to you, that is what we are here to do.

If you would like any further information in relation to the information contained in this article, please contact K.C. Hilton at WNB Legal, 0419 464 946.