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What you need to know about Tenants in Common Disputes in NSW.

The majority of married couples and long-term relationships are glad to nominate joint occupancy as their number one choice. Couples in the early phases of a relationship, people who have never been in a relationship, people who live in a mixed family, and people who own a home with many parties choose tenants in common.

What tenancy choices are available:

Tenancy in common (or Tenant in Common) is a type of co-ownership arrangement in which two or more people share ownership of the same property but do not have a right of survivorship over each other.

You can “will” the portion of a tenancy in common to a beneficiary in your will or to specified people if you don’t have a will. The other “shareholder” does not have an automatic right of survivorship. Because it is more difficult to get into the NSW property market, it is usual for family members or friends to buy a home jointly. As tenants in common, all of the buyers can be on title.

This tenancy does not need you to be equal shareholders. If one side contributed more to the property, such as a 60/40 or 70/30 split, this can be taken into account. (The property’s total shareholdings must equal 100 percent.) Furthermore, if one party contributes significantly more, that higher earner can be designated as a 1% holder for estate planning and tax purposes. This is frequent when a husband and wife buy a home that they can split between 1/100 percent and 99/100 percent ownership. This is contingent on a party’s financial risk or threat of bankruptcy. The holding does not have to reflect the parties’ contributions, but it is preferable because it makes it easier for the courts to decide if there is a disagreement.

Each tenant in common has the right to manage their portion of the property independently of the other tenants. A tenancy in common has the advantage of protecting your shares in the proportions you specify.

Joint Tenant: When two or more people possess the same property jointly and equally, this is known as a joint tenancy. This tenancy cannot be held in any other capacity. If one of the tenants in a joint tenancy dies, the other tenants have an automatic right of survivorship under the law. This is a prevalent belief among spouses.

However, a third scenario exists in which more than two persons possess property as joint tenants AND tenants in common.

Let’s say Bob and Jane are married and agree to take out a mortgage with their daughter and son-in-law to help them break into the real estate market. The parents are assisting the daughter and son-in-law because they do not have enough equity. John and Jill are the names of the daughter and son-in-law. To protect the interests of all parties, they shall all be given the following titles:

As joint tenants to a 50 percent share, Bob and Jane, and John and Jill, as joint tenants to a 50 percent share as tenants in common.

This means that for their 50 percent part of the property, mum and dad are joint tenants, and for their 50 percent share, daughter and son-in-law are joint tenants. When Jane, that share goes to Bob, but not to John or Jill. John can then name a beneficiary in their will for their half-interest in the property.

The nominated tenancy is documented on the Real Property Act Transfer, which is a document filed with the NSW Land Titles Office (formerly known as Land & Property Information) and afterward registered on the new Certificate of Title.

Why is it necessary to specify how we will hold the property?

There are several causes for this:

Should one of the parties default, your bank will need to know how you hold the property. If the property is held as tenant in common, the bank can only pursue the defaulting party’s portion of the property, not all of it.

If one of the parties passes away, a Notice of Death must be completed and filed with the Land & Property Information Department. If you have a mortgage on a property, it is considerably easier to get the bank to produce the Certificate of Title so that the property can be transferred to the surviving individual. If the property is held as tenants in common, each party has a mortgage with a separate bank, and one party has died and left their share to a “new” person, having the “new” person registered on title can be complicated and lengthy process.

The Land Tax Division of the Office of State Revenue wants to know how you hold property. You may be obligated to pay land tax obligation to the Office of State Revenue if you already possess property as a joint tenant (50 percent share) and own other properties as a joint tenant in whatever share.

Unless the property value exceeds $3 million, your primary house is exempt from land tax. (The OSR classifies this as premium property.)

Because there is no uncertainty in your ownership of the property and you leave a legal will, the distribution of the property (either by transfer to beneficiaries or sale) is simple.

Joint Tenancy Termination or Severance

In the following circumstances, the joint tenancy will end:

  • when the property is transferred to a third party;
  • when joint tenant A transfers their interest to joint tenant B (making joint tenant B the sole owner of the property);
  • or when one of the joint tenants unilaterally terminates the joint tenancy (this can be done to protect the interest of one of the joint tenants in the case of a relationship breakdown).

When one or more joint tenants (but not all of the joint tenants) transfers all of their interest in the property, the joint tenancy is severed. The shares of a registered joint tenant who is not part of this transfer are unaffected.

This is done by filling out the appropriate form and submitting it to the appropriate government agency. In New South Wales, for example, this form can be found at the Land Registry Services. This transfer document, however, will require signatures from all of the owners.

What happens if one owner wants to sell his or her half of the property but the other does not?

Section 66G of the Conveyancing Act 1919 in New South Wales allows a property owner to apply to the Supreme Court for the appointment of a statutory trustee for the sale or partition of their property. There are costs associated with filing such an application, and these costs are likely to rise if the other owner(s) object. In Queensland, section 38 of the Property Law Act 1974 is the corresponding legislation.

Ownership of the subject property instantly vests in the trustee or trustees chosen by the Court for the purpose of selling the property once the Court issues decisions under the appropriate provisions of those acts in both states. After the trustee’s expenses, real estate agents fees, auctioneers fees (if applicable), and legal fees connected to the transfer of the property have been paid, the profits of the sale of the property are distributed between the parties (the former owners).

Many people are surprised that they have this option, yet it is usually the quickest and most cost-effective approach to settle a disagreement between them. Although the court application has fees, it is typically the only route for the parties to move forwards and find a settlement. Some people can battle over something they can never agree on for years, wasting time, energy, and legal fees in the process. The Court’s intervention is sometimes the necessary circuit breaker.

Of course, the other owners have the option of purchasing the portion of the property owned by the owner who wishes to sell. Before going to court, it’s usually a good idea to look into that alternative. Any such acquisition might be made by agreement between the parties before the initiation of Court proceedings, after the initiation of Court proceedings, or even after the issuance of Court orders.

If you are involved in tenants in a common dispute or a joint tenancy dispute, talk to our NSW Property Lawyers today.