Property co-ownership: joint tenancy vs tenancy in common

Buying a property with another person (or people)? You might not have thought about it, but you’ll need to nominate the type of ownership structure you plan to enter. The two most common types are joint tenancy and tenancy in common.

An ownership structure is an agreement between you and the co-owners of your property on how the asset will be owned. This can cover things like who is entitled to the property after one owner passes away, or how much each tenant gets when you sell the property.

The structure you choose comes with its own set of rules. But what is the difference between joint tenancy and tenancy in common, and why might you opt for one over the other?

Joint tenancy assigns each person in the agreement equal ownership status of the property. 

Rather than seeing it as a 50-50 split, the law recognises that, under a joint tenancy agreement, each person is entitled to 100% of the property. 

Who are joint tenancy agreements for?

Joint tenancy agreements are common among married couples or de facto spouses who have grown accustomed to sharing their assets equally. 

Importantly, if one tenant dies, the other has right of survivorship, which means that they automatically assume the deceased tenant’s share of the property.

This overrides any wishes to the contrary expressed in the deceased tenant’s will. So if you’d rather your share of a property be passed on to someone else in the event of your death, tenancy in common might prove to be a suitable alternative.

Tenancy in common differs from joint tenancy, in that the share of the property each tenant has can be as equal or unequal as you agree to. That means, for example, ownership could be split 50-50, 60-40, or even 99-1. 

The division of ownership can be decided upfront by each tenant, or determined by how much each person contributes towards the home loan. 

Who are tenancy in common agreements for?

A tenancy in common ownership structure might be preferable for friends or investors who are buying a property together or applicants who won’t be making equal contributions towards the mortgage and want ownership to reflect that.

You might also consider a tenancy in common arrangement if you have children from a previous marriage and would rather your share of a property defaults to them in the event of your death, rather than be passed onto your spouse or their family.

Unlike joint tenancy, there is no right of survivorship in a tenancy in common agreement, meaning that if one tenant passes away, their interest in the property becomes an asset of their estate.

Individual tenants will also be able to dispose of their share of the property as they see fit, and do not require permission from the other tenants if they intend to sell, mortgage, or rent it out.

Whether you opt for a joint tenancy or tenancy in common arrangement will come down to personal preference. However, it’s a good idea to speak to a legal professional who can walk you through the risks involved in each.

They will also help you draw up a co-ownership agreement that outlines the rights and obligations of each co-owner. This will cover things like who will occupy the property, how repayments will be made, and what happens if one person wants to sell when the others don’t. Without this, you could become mired in costly litigation if a dispute arises.