When buying a property in Australia very few couples actually understand the two methods of joint ownership, nor are these methods properly explained to them by their conveyancer at the time of purchase.
There are two ways you can jointly own a property in Australia - Joint Tenants or Tenants in Common. Being a joint tenant means that you do not own any part of the property yourself, but rather you own the whole of the property jointly with another person. If you pass away, the surviving joint tenant automatically becomes the sole proprietor of the property, regardless of what your Will says. On the other hand, if you are a Tenant in Common, you individually own a share of the property and are able to include this share in your Will.
Owning a property as joint tenants has effectively become a default method of joint ownership in Australia, as a lot of buyers are simply unaware of the existence of the other way of joint ownership. This is mainly because the standard Contract for Sale assumes joint tenancy as a default option, if you do not specifically select otherwise. However, not a lot of people realise the consequences this choice may have on their estate planning.
Let’s take a fictitious example of Mrs Wong for illustrative purposes to better understand the above consequences.
Mrs Wong has been married to her husband, Mr Wong, for over 10 years. Mr and Mrs Wong do not have children of the marriage, but Mrs Wong has 1 child from a previous relationship, Timothy aged 16, who leaves with her and Mr Wong.
In 2018 Mr and Mrs Wong bought an investment property in rural NSW together as joint tenants. Mrs Wong does not have any other property in her name and resides with Mr Wong at his Maroubra home, registered solely in Mr Wong’s name.
Mrs Wong is not happy in her marriage, but is trying to make things work in her relationship with Mr Wong. To make things worse, Timothy and Mr Wong are not seeing eye to eye and often have heated arguments. Mrs Wong is worried that if something were to happen to her, Mr Wong would not offer any support and assistance to Timothy.
Mrs Wong decides to make a Will to ensure Timothy will receive part of her investment property, if she passes away. She attends the offices of a local lawyer, who tells her that although she can make a Will, her investment property would still pass to Mr Wong, regardless what her Will says. This is because as a joint tenant, Mrs Wong owns the whole of the property together with Mr Wong, as opposed to owning any share of the property separately.
The lawyer explains to Mrs Wong that if she wants to give her son 50% of the investment property in her Will, she needs to do a unilateral severance of Joint Tenancy. The lawyer prepares the required documents, which are signed by Mrs Wong and are lodged with the Land Titles Office. The mortgagee on title and Mr Wong are also notified of the unilateral severance of the joint tenancy. The Land Titles Office makes the required changes and Mr and Mrs Wong become tenants in common in equal shares. Mrs Wong can now include her share of the investment property in her Will.
Although the lawyer's fees were less than a standard fee for a conveyancing matter, this has been a good lesson for Mrs Wong, who will now be extra careful when choosing the method of joint ownership in the future.
If you own a property jointly with another person, make sure you know and understand the method of ownership as it will have an enormous effect on your estate planning.
If you would like to change the method of ownership, this can be done unilaterally without the other persons consent and our experienced lawyers are able to assist you with this. Contact Surge Legal now on 02 8722 5021 if you require any assistance with property law or estate planning.