Buying Property – 2 Types of Ownership
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When purchasing a property, there are numerous options of ownership that can be explored.
Two such options are to become joint tenants or tenants in common. Whilst at first it may seem as if they offer the same rights regarding the ownership rights of both parties, there is a major differentiating factor between these forms of ownership. That is, in the case that a tenant passes away, different rules will apply.
Joint tenancy refers to a situation where two or more individuals have joint ownership of a property as a whole. A common example of this would be married couples who jointly purchase a house together. In the event of the death of one of the owners of the property, legal rights of survivorship will apply. This means that the deceased tenant’s ownership automatically passes to the surviving tenant or tenants and the property does not form a part of the deceased person’s estate.
Tenancy in common involves two or more individuals who hold either equal or unequal shares in a property. Tenants may exercise their discretionary rights with these shares; and are able to lease, mortgage or sell them. An example would be if two people chose to purchase a house that cost $1,000,000. The first person may contribute $600,000 and the second $400,000. This may lead to them electing to split the title in shares of 60% and 40%, equivalent to the financial contribution of each person. Under this arrangement, if a tenant dies, their share in the property does not automatically pass to survivors under legal rights of survivorship. Rather, their share will pass as stipulated in the deceased’s Will.
If you are considering purchasing property with another person, it is important to make ensure you have sufficient understanding of the legal ramifications. Ownership of property has implications on tax, how you draft your will, distribution of the property upon your death. It is well worth your while to seek legal advice before finalizing your decision as to the ownership of property.
For more assistance with property and other matters you can contact JK Lawyers. Our legal team has many years of experience and can resolve all sorts of property ownership issues.