WAYS OF OWNING A PROPERTY AS A COUPLE
Updated: Jan 7, 2021
There are two different ways in which a property may be owned jointly by two or more persons:
1. Joint Tenants
If you own the property as joint tenants then the property automatically passes to the survivor(s) should one of you die. You will not be able to give away your share of the property through your Will.
This is the arrangement most often used by couples buying property as it does mean an easy transfer of the property to the survivor when one dies.
A person’s share of a jointly held property does not form part of their estate if it is held on a joint tenancy basis. Where the property is held jointly in this way by a married couple the property will pass to the surviving spouse irrespective of any wishes expressed in the deceased’s will regarding other assets they hold.
2. Tenants in Common
If two or more people own the property as “Tenants in Common”, then they will each have a distinct share in the property which need not be in equal percentages. For example, if two people have provided monies for the purchase of a property in different proportions, then the ownership could be shared in direct relation to those proportions. Alternatively, it could be shared in any other way as agreed. The proportions will normally be expressed as a percentage.
The “Tenants in Common” approach is typically adopted in the following situations: a) Where one partner in a couple has children from a previous marriage whom he/she wishes to benefit from his/her share in the property on his/her death. Often the Will includes a clause giving the surviving partner/spouse the right of occupancy of the property until their own death (or remarriage/or other condition if you wish) and then transferred to the children. (b) In the case of an unmarried couple who have jointly purchased a property and wish their individual interest to be dealt with separately.
Summary For many people, the standard arrangement of joint tenants will meet their requirements and will be the most convenient form of ownership. However, in a number of circumstances, particularly where couples may have been married before it may be appropriate to reorganise the ownership as Tenants in Common
To change from Tenants in Common
Assuming the property is owned as joint tenants by two people and they both agree then Landgate require that paperwork is completed in order to “sever the joint tenancy”. There is a charge for this service. You do have to inform the mortgagor (if there is a mortgage on the property) as the copy land title the mortgagor holds would need to be changed to reflect the change of ownership. In most cases, this is just part of the process and the mortgagor would consent to this as the couple would remain jointly liable for the loan on the property.
Assuming the property is owned as joint tenants by two people but one does not agree then:
The party wishing to sever the Tenancy Agreement must go through the family court to effect this change.
Advantages of severing tenancy (i) Can ensure named beneficiaries will inherit a share of a property. (ii) It gives you freedom to gift a share of the property either outright or by giving a right of occupancy (e.g. to your spouse or partner) with directions as to what happens to the share of the property after the occupants death. (iii) In certain cases the survivor can be given the right to move home using the deceased’s partner/spouse’s share of the property. This would have to be consented to by the deceased’s trustees. (iv) May avoid the need for a Mutual Will [refer our fact sheet on Mutual Wills] Disadvantages of severing a tenancy (i) If the surviving partner has been given the right of occupancy only then they are only able to access the equity in their share of the property (the other share does not belong to them). (ii) This could in the long term cause financial hardship and also leave the surviving spouse/partner living in a property they no longer wish to live in.
We have developed processes that overcome these disadvantages. This may be an appropriate instance where the use of our free initial telephone advice is warranted. Ask our authorised representative for more on availing yourself of this advice.
For further information contact our team on (08) 9368 1337
Information provided by Willcraft Estate Planning Pty Ltd, An Incorporated Legal Practice.