The price of Aussie property – whether you bought way back when when mortgage rates were in the double digits or in the recent years of sky-high purchase prices – means that sharing the cost with another person is often required, and that person is usually your spouse or partner.
But the way you structure your ownership of the property – as joint tenants or tenants in common – can have a big impact on the way the asset passes to another person after your death or that of your co-owner.
Joint tenancy is usually the default for couples that purchase a property together. Joint tenancy gives each tenant equal ownership and interest in the property, as well as the right of survivorship. Survivorship means that upon the death of either one of the joint tenants, the property will be owned by the surviving tenant or, in the case of multiple surviving tenants, the ownership will be equally divided between them.
Joint tenancy is usually the preferred option for married or long-term couples and unless the buyers state otherwise when purchasing a property with another person or other people, the law will recognise ownership as a joint tenancy.
While that works well for most couples, it’s important to know that the right of survivorship overrides any other intentions a will may state about how the property is owned after a tenant’s death.
The second-most common way to own a property with another person is called tenants in common. The tenants-in-common ownership structure is slightly more complex than joint tenancy but allows more freedom of choice when it comes to the division of the property.
Co-owning a house as a tenant in common means that each tenant has a share in the property that they can dispose of however they wish. Importantly, there is no right of survivorship under tenants in common, so each tenant can leave their share of the property to anyone they wish in their will – whether that be the co-owner/s or someone else entirely.
Also, unlike joint tenancy, the property does not need to have equal ownership from every person involved in the purchase. For example, one tenant could own 90 per cent of the property, while the other tenant owns 10 per cent.
The ownership option best suited to your situation depends very much on your needs, particularly around whether the right of survivorship fits your inheritance intentions.
There are other key considerations, too, including:
Is there an imbalance in the amount of money each tenant will or has contributed to the property purchase? If so, a joint tenancy may not be the best ownership structure.
Will all tenants be purchasing at the same time? Joint tenancy may suit a purchase if all tenants are ready to buy at the same time, whereas tenants in common allows another tenant to enter the contract at at a later date.
Tenants in common can work for buyers looking to invest in property with investment partners, as well as people who’re in second marriages and would prefer their interest in a property be handed to their children rather than their new partner.
However, every situation in law is unique and should be dealt with on a case-by-case basis. So before taking the leap into the world of property ownership – seek advice from a legal professional to make sure you’re making the right decision for yourself.