Joint Tenants Vs. Tenants In Common

In New Zealand, when purchasing a property personally with another party you can choose to own the property as Joint Tenants or Tenants in Common. Propery can also be registered under the Joint Family Homes regime, however a Bill is currently before Parliament to repeal the Joint Family Homes Act 1964, so this option may no longer be available.

Deciding which form of ownership to use depends entirely on your personal circumstances. The differences between Joint Tenants and Tenants in Common are explained briefly below.

Joint Tenancy

Joint tenancies arise when two or more people (‘joint tenants’) buy a property together and their shares in the property are undivided and undefined.

One important feature of a joint tenancy is the right of survivorship. This means that when one of the joint tenants dies, their share in the property will transfer to the surviving joint tenant(s). The interest in the property therefore is not available for disposal under a Will or under an intestacy.

Joint Tenancy ownership is most commonly seen in purchases by a husband and wife who intend on owning the property equally and passing their share to the survivor in the event of death.

Tenants in Common

Tenancy in Common allows for owners to hold a distinct share of a property. There is no requirement that a Tenancy in Common must result in equal shares of ownership. The amount of a person’s interest in the property will most likely be recorded on the title, for example: “Mark Smith as to a 1/3 share and Jane Brown as to a 2/3 share”.

One major advantage of owning property as a Tenant in Common is that the owners are able to dispose of their share in the property in accordance with the terms of their Will. If a person does not have a Will, their share in the property will be distributed in accordance with the provisions of the Administration Act 1969. It is therefore important that owners have a valid Will in place that clearly sets out how the property is to be dealt with after their death.

Severance

A Joint Tenancy can be severed unilaterally to become a Tenancy in Common. This may be opportune in the event of bankruptcy of one of the joint tenants or the breakdown of a relationship. Where a relationship ends, it is often crucial that an existing joint tenancy is severed to prevent a share of the property being transferred to an ex-spouse in the event of either spouse’s death prior to resolution of relationship property matters.

Summary

For couples wanting to buy a property together, it is important to consider the effect each type of ownership will have on them. Relationship property and family protection implications are significant. It may be an option to enter into a contracting out agreement under the Property (Relationships) Act 1976 or a property sharing agreement to set out more detailed terms and provisions regarding the ownership of the property.