When purchasing property in Queensland with another person, you will be asked whether you want to hold the property as joint tenants or tenants in common. It may seem like just a technical detail, but it has significant legal and financial consequences, particularly around ownership shares, inheritance, and what happens if personal and relationship circumstances change.
Getting this right at the start of the process ensures the ownership structure reflects your intentions from day one and can avoid additional costs or complications if changes are required later, as there is sometimes stamp duty payable when you change tenancy and shares in a property.
The Key Difference
The main difference between holding a property as joint tenants and tenants in common is whether each owner holds a diverse share in the property, or equal, and what happens to that other share if one owner dies.
They are further explained below.
Joint Tenants
Joint tenancy treats all owners as holding the property together as one combined interest, with equal shares rather than in separate shares.
The key feature is the right of survivorship. If one owner dies, their interest automatically passes to the surviving owners, outside of their estate and Will.
For example, if a couple owns a property as joint tenants and one partner dies, the surviving partner becomes the sole owner automatically. This is one reason it is commonly used by married couples and long-term de facto partners.
However, joint tenancy is not appropriate in every circumstance. It does not take into account unequal financial contributions between owners and prevents an owner from leaving share in the property to another person through their Will.
Tenants in Common
Tenants in common means each owner holds a defined share in the property, totalling 100% combined, which can be equal or unequal (for example 50/50 or 70/30). Each person’s share is separate and can reflect their financial contribution or agreed arrangement between the parties.
Upon death, a tenant in common’s share does not automatically pass to the other owners. Instead, it forms part of their estate and is distributed in accordance with their Will. This can result in a co-owner’s share passing to someone else entirely, potentially creating an unintended new co-owner.
This structure is often used by friends, family members, or business partners, and where owners want flexibility or different ownership proportions. It is also commonly considered where there are tax or structuring considerations, for which accounting and financial advice should always be obtained.
Banks may also have requirements around ownership splits, particularly where loan applicants have different income levels or where the ownership proportions do not match borrowing capacity. This is something to also consider with your broker and financial planner and ensure that you check it matches what you advise your lawyer, otherwise banks will in fact have an issue with this.
Can it be changed later?
Yes, but not automatically. A joint tenancy can be severed to convert ownership into tenants in common, and vice versa, but this requires legal steps and may also need lender consent if the property is mortgaged. Additionally, there are often registration, stamp duty and legal costs involved. It is generally simpler and more cost-effective to choose the correct structure at the time of purchase.
Final Thought
This decision has long-term consequences for ownership, estate planning, and financial arrangements. Joint tenancy suits those wanting simplicity and automatic transfer on death, while tenants in common provides flexibility and control over shares.
If you are unsure which option is right for your situation or have any questions or queries regarding the meaning and effect of holding property as joint tenants or tenants in common, please do not hesitate to contact the property team at FC Lawyers.
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