When you are deciding to buy a property with someone else, there are multiple factors that must be considered and decisions that need to be made. One of these decisions includes deciding how the ownership of the property is to be registered on the title. Making this decision is important as the type of property ownership that you enter into can affect things such as decision making, disputes and property transfers in the future.
First things first, a property title holds legal information about a piece of property, including details about the land and, crucially, who owns it or has a mortgage on it. During the settlement of a property transaction, the title is updated to reflect the change in ownership and the registered manner of holding.
Manner of holding refers to how your ownership of a property is registered on the property title, and we have set out the two main key ownership options available to you below:
Joint tenancy refers to a legal arrangement in which two or more people own a property together, each with equal rights and obligations. Usually, joint tenancy is used by married and non-married couples.
Joint tenancy also creates what is known as a right of survivorship, so if one owner passes away, their interest in the property is directly passed on to the surviving party(s) without having to go through one’s estate distribution (therefore, the property would not form part of the deceased tenant’s estate).
For example, person X and person Y own a property under joint tenancy. In the unfortunate event of person X passes away, their share of the property will automatically be given to person Y (regardless of any Will person X might have had at the time of their passing).
Tenancy in Common:
Tenancy in common is an arrangement in which two or more people share ownership rights in a property. Each independent owner may control an equal or different percentage of the total property, which can be commercial or residential. Usually, tenancy in common is used by friends or business partners.
Under tenancy in common, when one owner passes away, their interest/share in the property is passed to their estate (i.e. they have the right to leave it to any beneficiary they choose).
For example, person X and person Y may decide to buy a property together for $600,000, and person X may contribute $400,000, giving them 60% interest in the property, whilst person Y may contribute $200,000, giving them 40% interest in the property.
Both ownership options have their own pros and cons, however it is important for potential buyers to consider their preferred manner of holding prior to purchasing the property.
Please feel free to reach out if you have any further questions!