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Why should you care whether you own a property as ‘joint tenants’ or ‘tenants in common’?

Because it can be disastrous if you get this wrong and lose the ability to pass your property on to others.  Don’t leave your intended beneficiaries out in the cold.

When purchasing a property you will need to consider whether you want to purchase a property with another person as ‘joint tenants’ or ‘tenants in common’?  There is a very important difference between these types of ownership.  This diagram below depicts the difference.

Joint Tenants

If you purchase a property with another person (eg. your spouse) as ‘joint tenants’, you will each hold an undivided share in the whole property.  The right of survivorship applies to ‘joint tenancies’ which means if one owner dies (and the joint tenancy has not been severed) the property ‘as a whole’ will pass to the surviving owner.  This will occur even if it is contrary to the deceased owner’s will.  Owning a property as ‘joint tenants’ is suitable to a marital type relationship where the property will be owned by the surviving spouse.

Tenants In Common

If you purchase a property with another person (or multiple people or entities) as ‘tenants in common’, each owner will own an individual share in the property.  The benefit of owning a property as ‘tenants in common’ is that if one of the owners dies, the surviving owner(s) retain their individual share in the property and the deceased owner’s share of the property becomes an asset of their deceased estate (which can be passed on to the beneficiaries of their will).  Owning a property as ‘tenants in common’ is suitable to purchases made by siblings or commercial type relationships where the parties intend to acquire separate shares in the property.

What happens if you get it wrong?

If you mistakenly purchase a property as a ‘joint tenant’ instead of a ‘tenant in common’, this can have the disastrous effect of preventing your intended beneficiaries from inheriting your property after your death.

Here is an example of where it can go wrong:

Two brothers, Nick and Sotirios decided to purchase a commercial premises from which they operated a fish and chip business.  They purchased the property as ‘joint tenants’.  Unfortunately, Nick died, and as a consequence of the property being owned as ‘joint tenants’, Sotirios became the sole owner of the property because of the right of survivorship.  This meant that Nick’s widow had no right to the property.  Nick’s widow was understandably distraught about Sotirios’ refusal to afford her a share of what had been her husband’s property.  Nick’s widow (and the executors of the estate) issued legal proceedings against Sotirios, arguing that her husband had intended that the property be purchased as ‘tenants in common’ (not as ‘joint tenants’) in which case she should be entitled to her share through her deceased husband’s estate.   

After many years in litigation, Nick’s widow’s case succeeded at Court.  However, Nick’s widow would have avoided significant legal costs (and familial hostilities) if the property had been correctly purchased by Nick and Sotirios as ‘tenants in common’ in the first place.

Stassinopoulos v Stassinopoulos [2011] VSC 647 

Key takeaway point

When purchasing a property, make sure you give careful thought to:

  • the name of the registered owner/s that will be on the title to the property; and
  • the capacity in which the property will be owned if there are multiple owners – that is, as ‘joint tenants’ or ‘tenants in common’. 

If you are unsure, it is imperative to ask Alphastream Lawyers for advice. 

You can contact us on:
(03) 9548 5500 or
office@alphaco.com.au

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Alphastream Lawyers
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