When two or more people own real estate together, they can do so as joint tenants, or as tenants in common. The difference is important from an estate planning perspective, because it changes how the property can be dealt with in your Will.
Joint tenants? What does that mean? Owning property as joint tenants means that you and your co-owner both own 100% of the property. You can’t deal with your share of the property independently of your co-owner – so to sell the property, both of you need to agree. If you die first, your interest in the property goes to the other owner – regardless of what your Will says.
OK, got it. What about tenants in common? Owning property as tenants in common means that you own a share of the property, and your co-owner or co-owners own a separate share of the same property. It doesn’t need to be an equal share – you can own 1%, or 99%, and your co-owner will own the balance. You can deal with your percentage share of the property independently of the other owner – you can sell your share (if you can find someone who wants to buy a part interest in a property), mortgage it, or gift it away in your Will. You don’t need the permission of the other owner. If you choose to write a Will which gifts your share to someone who is not the co-owner, then when you die, the person who receives your share will own the property in your place, and your co-owner’s interest will not be affected.
Can we change ownership from joint tenants to tenants in common or vice versa? Yes you can – but you should check that you are not triggering a stamp duty consequence or a capital gains tax event. Transfers between married spouses or couples in a de facto relationship are not subject to stamp duty, and a transfer of a principal place of residence is usually exempt from CGT, but you should always get legal advice before transferring property.
How do I know whether I own a property as joint tenants or tenants in common? Usually, spouses will own property together as joint tenants. You can check with the conveyancer or solicitor who assisted you with the purchase. Otherwise, you might have a copy of the Transfer of Land which you would have signed as part of the purchasing process, or you might have the Certificate of Title or a copy.
Next week – part 2 – why does it matter?
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