Breaking into the property market just keeps getting harder which is why more people are thinking about buying with a friend or family member. It allows them to share the costs and allows them to get onto that all important first rung of the property ladder. But it is important to understand the legal aspects of how you choose to hold that shared property.
There are two ways for multiple people/entities to own property jointly in Queensland; Joint Tenants and Tenants in Common. Neither of these relates to being a tenant in the sense of paying rent to a landlord, but instead are the legal terms which describe how the ownership of the property is structured.
As a joint tenant, you collectively own the entire asset with the other joint owner or owners. You do not have a defined portion of the property, it is an all or nothing situation. Joint tenancy comes with the right of survivorship. Survivorship means that if one party should die then the ownership passes automatically to the surviving joint tenant or tenants. This happens without the need for a will. In fact, joint tenants are not able to leave “their share” to anyone as there is no share to leave. This type of ownership is most common in couples. The last surviving owner can leave the property to whoever they want as part of their estate.
Tenants in Common
The alternative option is as Tenants in Common. In this case, each party has a specified share of the property which is usually in proportion to the financial contribution they make to the purchase. For example, if Bill and Ted buy a house together and Bill pays $75,000 of the deposit and Ted pays $25,000, Bill could have a 75% share. It isn't a requirement that the financial contribution determines the share of the property each person will own - Bill and Ted can both own a 50% share of the property regardless of financial contribution.
The proportion of the property owned by each part also doesn't actually mean that Bill will own 3 out of the 4 bedrooms or that they need to put up a fence for Ted’s quarter of the yard it just means that the ownership, and proceeds of any future sale, are defined at the outset. This is important as there is no survivorship with Tenants in Common. Ted can leave his share to whoever he wishes in his will. If he doesn’t have a will the share will not automatically pass to Bill. These arrangements are very business focussed with the probable sale of the property being a key consideration.
Selling Jointly Owned Property
One very important consideration for both Joint Tenants and Tenants in Common is that no single owner can sell all or part of the property without the agreement of the other owners or a Court Order. You may want to cash out of your share but you can’t do it alone.
If you need advice on buying or selling a property with another person, co-ownership agreements, buying your first home, or any property related matter Cairns Conveyancing Solicitors can help. Call us now for a free consultation.