What is the difference between joint tenancy and tenants in common? Buying a property is a significant investment, and in this current economy, it’s even more of a risk. With inflation on a steep rise, many people are unable to purchase a house with a single income and are opting to purchase a house with their partners or their family. Although this may seem like the easier and more affordable option, it’s important to understand and research the different types of ownership agreements to ensure you are in the right one.
Joint tenancy and tenants in common
In Queensland, section 33 of the Property Law Act 1974 (Qld), states when two or more people enter an agreement together and purchase a property together, they are required to decide whether they are going to hold the property as joint tenants or as tenants in common. This Business Kitz blog is going to explain the difference between joint tenancy and tenants in common to decide which is best for you.
What is joint tenancy?
When you are a part of a joint tenancy, you and your partners will have your names on the title and are listed as co-owners. By entering into a joint tenancy this means that you agree to the terms, and upon the death of one of the joint tenants their shares get automatically distributed equally between the remaining joint tenants. This is legally known as survivorship. The rule of survivorship will apply regardless of what the deceased has outlined in their will.
The main issue that emanates with joint tenancy is when one or more of the tenants decides to sell their interest but the other does not. If this occurs, the best way to go about it is to make an application to the court under the Property Law Act 1974 (Qld) to request an order for the partition so the sale can proceed.
With these conditions and reasons, a joint tenancy is best suited for a couple that intends to live permanently together and would want the property to automatically go to their partner if they were to pass away.
What does tenants in common mean?
Tenants in common are when you and others own property in individual shares, and the names present on the title are all the names of those who are buying the land. Generally, the tenants in common will be those who contributed the purchase funds. The way the property shares are distributed is based on how much money was contributed to the purchase price. If the property is owned by tenants in common, and one of the shareholders passes away, the individual’s fractional share is distributed according to their will. If there is no valid will, the fractional shares will be distributed between the remaining shareholders according to the rules that apply upon intestacy.
Tenants in common is recommended to those who have multiple people purchasing a property and who may not all contribute an equal amount towards the purchase. This is the best way to ensure the investment is split fairly and also decreases the chances of disagreements. If you do decide to enter this agreement, it’s important to state in your will what you wish to happen to your shares.
Whilst there are positives and negatives to both types of agreements, we recommend that you consult with a qualified lawyer before entering an agreement. If you are considering entering either a joint tenancy or tenants in common, our team at Legal Kitz can assist you! Our sister company Legal Kitz can provide you with advice that is tailored to your unique situation. You can book a free 30-minute consultation with our experienced and highly qualified team via our website now.