Introduction
When entering the property market with others, it’s important to understand the differences between joint tenancy vs tenancy in common. These co-ownership structures not only determine how you share ownership but also define your rights to the property. Choosing the right type of ownership structure depends on your relationship with the co-owner and your financial goals.
This article will outline the key differences and elements between joint tenancy and tenancy in common.
How to Establish a Tenancy in Common
In a tenancy in common, each owner may hold different ownership percentages. These percentages can vary based on purchase contributions. People often compare this structure with joint tenancy. This is common in discussions among friends or family pooling resources to buy property.
To establish a tenancy in common one must meet the following requirements.
- Intent: A party can show an expression to have a tenancy in common through indicating severance. A party may state that the property will be distributed in shares of X and Y. If the parties don’t express a desire for co-ownership, they cannot co-own the property.
- Possession: co-ownership is through owning distinct shares of the exact same property.
- Presumption: In the absence of a joint tenancy (4 unities are not present) or the parties’ intentions are unclear, there’s a presumption that their ownership is a tenancy in common unless they are trustees.
As a result, each person holds a distinct interest in the estate. They have individual autonomy to sell or mortgage their interest in the property. When a share is sold, each owner typically receives a percentage of the proceeds.
How to Establish a Joint Tenancy
People commonly use joint tenancy for married couples, but it can also apply to multiple co-owners or corporations.[1]
- Title: When registering title for the estate, the co-owners must state that their interest is as joint tenants through the same legal documents or act.
- Time: Co-owners should express their interest simultaneously, unless they express their interest through a will or under a trust.. For example, a will may state that one’s children will become joint tenants upon adulthood. However, each child is most likely born at different times meaning that they cannot claim joint tenancy until they have all reached 18 years of age.
- Interest: Each interest in the property is to be divided equally, at the same time, and process. Anything else to the contrary would indicate a tenancy in common.
- Possession: The co-owners would possess the property, meaning that neither owner can deny the other exclusive rights to the property. The owner’s rights and entitlements to the property are equally shared.
Additionally, for a joint tenancy there should be the right to survivorship which indicates that if one of the tenants die, their share would be equally distributed to the others. For example, if there are 3 tenants and one of them dies, then the other 2 will receive around 16.5% of the share.
It’s important to note that if a deceased person’s property is distributed according to intestacy principles—meaning they did not leave a will—the Succession Act 2006 stipulates that the next of kin inherit their interest in the property as tenants in common. Thus, joint tenancy allows people to hold undivided equal shares in a property without specified ownership percentages. Neither party can sell or transfer their interest without ending the joint tenancy.
However, because of the notion of equal ownership, the sale of the property entitles each owner to equal proceeds. Therefore, despite one’s contributions to the purchase or maintenance of the property one may will receive the same. The principle of joint tenancy states that the parties form a single legal entity, which simplifies the mortgage arrangement by requiring only one mortgage.
Unequal Contribution to Purchase Price
Even if there is a clear indication to own a property as joint tenant’s if there is an unequal contribution to the purchase price, the court may deem that the relationship is as of tenants in common.[2]
In reinforcement, despite the absence of co-ownership a party may have an entitlement to the property if they contributed to the purchase price. If a party is the legal owner of the property and another party helped pay for it, the court may issue a resulting trust based on the share contributed. [3]
Conclusion
In conclusion, understanding the distinction between joint tenancy vs tenancy in common is crucial when entering into co-ownership arrangements. Each structure offers unique benefits and challenges, depending on the nature of the relationship between the co-owners and their financial objectives. Joint tenancy provides simplicity through equal ownership and the right of survivorship, often suiting couples or close relationships. In contrast, tenancy in common allows for flexibility with unequal ownership shares, making it ideal for friends or family pooling resources. Choosing the appropriate structure ensures clarity in ownership rights and responsibilities, helping avoid potential legal disputes in the future.
This article does not provide legal advice; instead, it aims to offer generalized academic information about the principles of joint tenancies and tenants in common. If you require qualified legal advice on anything mentioned in this article, our experienced team of solicitors at Jake McKinley are here to help. Please get in touch with us on 02 9232 8033 today to make an enquiry.
[1] . Conveyancing Act 1919 s 25 and Property Law Act 1969 s 26.
