Like many Queenslanders at one time or another in your life you will embark on the journey of entering into the acquisition of property with another person. At common law, an interest in land may be owned by an individual or by two or more persons concurrently. This person/s may be a relative, friend, spouse or business partner. In any instance it is essential that you understand you rights and obligations to the co-ownership arrangement.
Section 33(1) of the Property Law Act 1974 (Qld) provides that:
Any property and any interest, whether legal or equitable, in any property may be held by two or more persons-
- As joint tenants; or
- Tenants in common.
Understanding the nature of each tenancy is best achieved by contrasting it with the other type of tenancy.
Joint tenants outlines that neither party has a distinct or separate share in the property. Generally, no joint tenant can claim separate ownership of any part of the land nor can they claim a separate share in the property. This type of tenancy is common with relatives or spouses who purchase property together as the Right of Survivorship applies. The effect of the Right is that each joint tenant has a Right of Survivorship, meaning that when another joint tenant dies, their interest in the property is extinguished and the surviving joint tenants hold the property without question. Chief Justice Latham in Wright v Gibbons (1949) 78 CLR 313 at 323 described the process as follows: “if one joint tenant dies, his interest is extinguished. He falls out, and the interest of the surviving joint tenants is correspondingly enlarged”.
Before deciding on joint tenancy you may want to consider whether you have both contributed equally towards the acquisition and what each of your intentions are should one of you pass away.
Tenants in common will allow each co-owner a right to a separate share of the interest in the property. This should not be confused with meaning that each co-owner has a separate physical portion of the land. Rather it means that each co-owner has the right to deal with their share of the property as they wish. The interests of the tenants can be apportioned as agreed. Generally, the apportionments are based upon how much each party has contributed towards the acquisition of the property. The main distinction is that there is no Right of Survivorship with tenants in common, making this type more suited to arrangements between friends or business partners. Upon the death of one tenant their share shall pass to the person/s nominated in their Will or via rules of intestacy.
If a property transfer document does not stipulate how the co-owners are to hold the property, it will be automatically registered as tenants in common in equal shares, being 50/50. This may be detrimental in situations where the property is intended to be held to be in shares of 60/40 or 80/20.
In any circumstance careful consideration of how you will legally hold the property with your co-owner must be given. In the event of a dispute the tenancy of the parties will be relevant.
We assist in all types of property transaction matters, do not allow yourself or your new endeavor to be put at risk, call us today!