What is the difference between tenants in common and joint tenants?

When it comes to property ownership in New South Wales, the two most common forms of co-ownership are "tenants in common" and "joint tenants." While both involve two or more parties owning a property together, they are vastly different and have distinct legal implications and characteristics.

Tenants in Common

1. Separate Interests:
When a property is owned by tenants in common, each own a distinct share of the property. These can be in equal or unequal shares, depending on the agreement between the co-owners. For example, one owner might hold a 70% interest, while the other holds 30%. Each tenant is entitled to their share of the property with no tenant entitled to exclusive possession of the property.

2. Transferability:
Each tenant in common can sell, give, or will their percentage share of the property as they desire independently of the other co-owners. This also means that if one owner dies, their share does not automatically pass to the surviving co-owners but is included in their estate and distributed according to their Will or the rules of intestacy if there is no Will.

3. No Right of Survivorship:
Unlike joint tenancy, tenancy in common does not include any right of survivorship. This means that the deceased owner's share becomes part of their estate.

4. Flexibility:
Tenancy in common offers flexibility in ownership arrangements, making it particularly suitable for business partners, friends, or family members who want to own property together but maintain individual control over their share of the property.

Joint Tenants

1. Equal Shares:
Joint tenants own the property equally. Each joint tenant has an undivided interest in the entire property, meaning they all own the property together as an individual asset. You cannot own different percentage shares of a property owned as joint tenants. Each of the owners must own the same equal right in the property.

2. Right of Survivorship:
One of the key features of joint tenancy is what’s known as the rule of survivorship. When one joint tenant dies, their interest in the property automatically passes to the surviving joint tenant or tenants. This means that a when a person dies owning a property as a joint tenant with another person or persons the property does not form part of the deceased’s person’s estate and will not need to be included in Probate for the property to be transferred.

3. Unity of Ownership:
Joint tenancy requires what is known as the "four unities" to be present: unity of time, title, interest, and possession. This means that all of the joint tenants must acquire their interest in the property at the same time, under the same document, with equal shares, and they will have equal rights to possess the whole property.

4. Simplicity in Transfer:
The right of survivorship does simplify the transfer of property upon the death of a joint tenant as Probate will not be required to effect the transfer to the remaining joint tenant.

5. Risks:

As any property owned as joint tenants automatically becomes the asset of the remaining co-owner upon death of one of the owners, there is always the possibility of unfortunate outcomes. The joint tenant cannot leave their entitlement in the property to any other person through their Will regardless of their wishes.

6. Severing the joint tenancy:

If any one of the co-owners wishes to convert their entitlement as joint tenants in a property to tenants in common, they can sever the joint tenancy. This will create a new ownership structure where they will from then on own their entitlement as an equal percentage share of the property as a tenant in common.

Contact us for a free thirty-minute consultation with a lawyer.

Any information on this website is general in nature and should not be taken as personal legal advice. We recommend that you speak to a lawyer about your personal circumstances.

Photo by FOTEROS: