Co-ownership refers to the legal relationship shared by two or more people over an interest in property. Under Queensland law, co-owners are registered as either joint tenants or tenants in common. Knowing the difference between the two and recognising which kind of co-ownership you require is key to determining your rights, interests and obligations.
A joint tenancy means that co-owners share in the whole of the property together. No single owner can hold a separate or distinct share. Rather, all joint tenants share in the full entitlement to the property. For example, a co-owner in a joint tenancy cannot hold a 25% share over the property. Instead they are entitled to the full 100% of the property shared concurrently with the other joint tenants.
Tenancy in common:
In comparison, a tenancy in common creates distinctive and separate shares in the same property. Tenants in common may hold equal or unequal shares and typically an owner’s interest is determined by their contribution to the purchase price. Furthermore, tenants in common are free to deal with their interest separately. This is not to say co-owners can claim separate physical portions of the land. As in a joint tenancy, they still share in the complete use of the property together. This means a tenant in common may sell, gift or bequeath their interest in the property to someone else. This is not possible in a joint tenancy where co-owners do not have separate shares.
The fundamental difference: the rule of survivorship:
The defining feature of a joint tenancy, which does apply to a tenancy in common, is the right of survivorship. As a matter of law, the right of survivorship operates upon the death of a joint tenant to automatically transfer their interest to the remaining joint tenant/s. Co-owners who share in joint tenancies are not afforded the right to transfer their interest outside of that co-ownership such as by a will or trust instrument. It is for this reason, joint tenancy is common amongst marriages, where upon one spouse’s death, their interest will transfer to the remaining spouse. It is for the same reason that a joint tenancy is considerably less favourable amongst other partnerships such as between siblings, friends or business partners. This is particularly the case in partnerships such as these where co-owners are not bound together by law, have separate lives and different interests and goals. The right of survivorship will be avoided should the joint tenancy be severed.
Which form of ownership is best for you?
To determine which form of co-ownership is right for you, parties should carefully consider what they hope to achieve from their interest in the property, consider if their goals are the same as their co-owners and evaluate how much control they intend to have over their share. Furthermore, as each form of co-ownership also carries its own tax implications, seeking professional financial advice could also be of further advantage to help determine which is the most suitable.