Co-ownership & tenancy: jointly owned or in common?

By: B Stead

Co-ownership, joint tenancy, tenants in commonMany people own property with another person in a co-ownership arrangement.  Spouses or partners typically own their residence together in joint names, family members; or  friends may own a property together for investment.

An important issue to consider upfront when buying property are the consequences of when a co-owner dies. How the property is owned between people, that is, its tenancy, can give very different outcomes on death.  Ideally these should be considered at the time of purchase.

Questions to ask include who can take a co-owner’s interest when they die?  Would this be what they want to have happen?  If not, can they state their intention in their will? Or is the property owned in a way that on death the interest automatically passes to the survivor/s outside of a will, as in joint tenancy?  This article looks at tenancy issues. 

Two types of co-ownership

Tenancy is about owning property with others as co-owners.  There are two ways of co-owning property – joint tenants and tenants in common.  The legal entitlements of these are different, with different outcomes for ownership interests on death.

Co-ownership of property in these ways is not restricted to real estate, but can apply to other forms of property, such as joint bank accounts and credit card accounts. So a question for co-owners is who will inherit their interest?  Ideally this and other issues would be considered from the start, when choosing whether to co-own as a joint tenancy or tenancy in common, and aided by professional advice.

What follows is an outline of the key aspects of co-ownership in the context of succession and willmaking.  Keep in mind that only property owned personally can form part of an estate, and so only this can be given away in a will.

An important attribute of joint tenancy is a right of survivorship.  It means that when one co-owner dies, the survivor(s) automatically own the property by the operation of law.  This occurs independently of a will (and hence the probate process).

When eventually  there is a sole survivor, that person will own the whole property, and they may deal with it as they wish.  So it is important for a sole survivor to revise their will to take this change into account.  If not the statutory rules of intestacy apply, which may not lead to an undesirable outcome.

With tenants in common there is no right of survivorship.  Instead, each co-owner has a separate, undivided share in the property (although not in a physical sense), and may independently deal with it as they wish.  If owned in their own name it will form part of their estate and they may choose who will inherit it through their will.

The graphics outlines how it works.

Co-ownership, joint tenants, tenants in common, right of survivorship, survivorship, wills, estates, succession, inheritance, tenancy, WillsHub

Co-owning property with others can be either as joint tenants, or as tenants in common. When a co-owner sharing ownership as a tenant in common dies, their share passes according to their will, or the rules on intestacy if there is no will.

Combining joint tenancy under a tenancy in common

In a tenancy in common arrangement, two (or more) people may choose to own their particular share as joint tenants.

Changing a joint tenancy to a tenancy in common
The survivor’s rights apply as long as the property is owned as a joint tenancy.  To change to a tenancy in common, the joint tenancy needs to be severed in the lifetime of the co-owners.  Specific procedures are involved and specialist legal advice should be sought.

The graphic below extends the situation further to show what happens in each tenancy when there are three co-owners, and one dies.

tenancy, tenants in common, joint tenants, rule of survivorship, survivorship, wills, succession, inheritance, co-ownership, joint shares, shares in common, WillsHub

 

 

A note on terminologymost people associate the words tenant and tenancy as referring to leasing or renting property.  Their presence in joint tenancy and tenants in common are leftovers from feudal law concepts in the English law adopted into Australia.

The table below compares aspects of joint tenancy and tenancy in common.

Joint Tenants Tenants in common
Basis of co-ownership
No separation of ownership.Co-owners hold the property together as a whole.  Ownership is not separated into identified shares. Important attributes of this tenancy are the right of survivorship (see below) and the requirement for all owners to meet four elements when acquiring the property, known in law as the four unities.The four unities are time, title, interest and possession.  Basically all owners must have acquired the same type of interest at the same time, in the same transaction, to have equal rights to possess the whole property simultaneously.  As a result a close legal relationship exists between them. Ownership is separate.Each owner has a distinct, specified share in the property, separate to each other. The share is undivided, meaning it cannot be divided further or spread among other owners.  This allows an owner to dispose of their interest as they wish, either during their lifetime or through their will.Shares may be equal or unequal; either way they are expressed (in percentages or proportions) and recorded on the title.There is no physical division of the property; all owners have equal use rights, see Possession below.
Possession
Each owner is entitled to possession of the entire property at the same time, but no right to exclusive possession of any part. Even though co-owners separately hold specific shares, they are equally entitled to possess the entire property in common with each other, and at the same time.  No one has exclusive possession to any part.
Right of survivorship?
Yes. When a co-owner dies, the surviving co-owner(s) continue to hold the property.    This right of survivorship continues among surviving co-owners until there is one left.  This person will then own the whole property, (see the flowcharts). When they die, the property will pass according to the terms of their will, or the succession rules on intestacy.  No.
Are co-owners’ interest distinct from each other?
No. A co-owner does not hold any particular share solely in their name.  Everyone owns the whole property together. Yes. Each co-owner holds an identified proportion separate to the others.
Can a co-owner deal with their interest independently of the others?
No. All co-owners must act together as a whole to preserve the joint tenancy.  To do otherwise may end or “sever” the joint tenancy and the co-ownership would become as tenants in common.A feature of joint tenancy is the close relationship formed between co-owners to create it in the first place.  See the four unities above. Yes. Co-owners may deal with their shares as they wish, independently of each other.  They may sell, mortgage, transfer, lease or dispose of by will without affecting the tenancy of the others.
Planning for succession & willmaking – Does an owner have an choice or control in who inherits their interest?
No. On death the right of survivorship rule automatically applies and independently of intentions expressed in a will. Yes. If owned personally a co-owner’s share becomes part of their estate when they die, consequently they may choose who takes their interest by making a valid will.
Can a co-owner dispose of their interest in their will?
No. The survivorship principle overrides a will. If a co-owner decides they no longer want their interest to pass automatically to the others, they need to sever the tenancy and own as tenants in common. Yes, if owned in their name, to whomever they choose, in their lifetime or by nominating a successor in their will.  If no choice is made, it passes according to the laws on intestacy. 
When a co-owner dies 
The right of survivorship applies.  This means that when a co-owner dies the surviving co-owners automatically continue to own the whole property, by the operation of law. If there are only two co-owners or joint tenants, then on the death of one, the surviving one automatically owns the whole property in their name.  When the survivor dies, the property passes according to the terms of their will, or by the statutory rules of intestacy. Each owner can dispose of their share independently of the others in their lifetime, including by will, and to whomever they choose.If no will or an invalid will, then their interest is distributed according to the statutory rules of succession on intestacy.
 Is probate required?
 No.  Yes.
Changing the title records – generally See your Land Titles Office for information and requirements.
To note the survivor(s) on the register of land titles, Land Titles Offices usually require presentation of a:

  • Notice of death or a copy of the death certificate
  • Completed application form for registration (eg an Application to register death by survivor form, SA; Notice of Death form, NSW.)
  • Copy of the Certicate of Title, if mortgaged, this will be held by the mortgagor (usually a bank)
  • Lodgement or registration fee.
Land Titles Office reguirements typically include copies of the:

  • Transmission Application by the deceased’s personal representatives
  • Grant of Probate or Letters of Administration, and/or
  • Notice of Death
  • Lodgement fee.

B Stead
BHS Legal
30 November, 2013
Last updated 9 March 2015.

Important notice: This article is intended for general interest and information only. It is not legal advice, nor should it be used as a substitute for legal advice. Always consult a legal practitioner and/or other professional for specialist advice specific to your needs and circumstances, and rely on that.

© BHS Legal

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