The type of ownership of jointly owned property may be as follows:
Joint Tenants
This form of ownership exists when parties have equal ownership and interest in the property. A right of survivorship exists, meaning that in the event of the death of one proprietor, the survivor or surviving parties automatically become entitled to the deceased's share of the property regardless of the content of any Will of the deceased. This is the type of ownership generally preferred by married couples, however, can also be used in other property ownership arrangements.
Tenants in Common
This is a form of joint ownership of a property in which each person owns a share of the property, equally or unequally. When owning a property as a tenant in common, one party can sell their shares to the property without impacting the property interests of the remaining tenants in common. Should the owners sell the property as a whole, the proceeds of the sale will be distributed according to the individual interests that are held.
There is no right of survivorship relating to property owned as tenants in common. Therefore, upon the death of one proprietor, that person's interest in the property will pass according to the terms of that person's Will. This type of ownership is generally preferred by business partners.
Severing joint tenancy
A joint tenancy may need to be severed for a number of reasons such as in instances of divorce. A joint tenancy can be severed in the following ways:
Upon the sale of the property;
When joint tenant A transfers their interest in the property to joint tenant B meaning that joint tenant B becomes the sole proprietor; or
Through a unilateral severance of joint tenancy. This occurs when a joint tenant changes the co ownership of the property from joint tenancy to tenants in common. The joint tenant changing the ownership need not give notice or get permission from the co owner.
Survivorship applications in joint tenancy
A survivorship application is used by a surviving proprietor when a joint tenant on a property title has passed away. This is an application to allow the surviving proprietor to become the sole proprietor on the title, removing the deceased’s name from the title in the process.
For the purpose of Capital Gains Tax, joint tenants are treated as tenants in common owning equal shares in the asset. This means that if you are a joint tenant and another joint tenant dies and the asset is passed to you. If the property was the deceased’s principal residence, you may be entitled to the Principal Place of Residence exemption. You should always obtain appropriate taxation advice in relation to such matters and further information can be found on the Australian Taxation Office website.
Do you need to make a survivorship application or sever a joint tenancy?
ASAP Lawyers regularly accepts instructions in survivorship applications and the severing of joint tenancies. To speak to an experience property law professional contact us on 03 9450 9400. Our services include the preparation and lodgement of all necessary documents with the Land Titles Office to effect the change in title.