Buy In Joint Names Or Tenants In Common

Buying in Joint Names or Tenants In Common, what’s the difference?

An increasing number of first home buyers, second time home buyers or property investors are buying property in Joint Names, Tenants In Common or co-ownership by pooling their deposits, finances and resources with friends, family, de facto or compatible business structures. The main benefit of buying a property in a co-ownership may provide you or your co-purchasers with the means to enter the property market earlier than later or only being able to purchase a small apartment, to purchase a better quality or higher value property.

However, if you choose this co-purchaser option you may need to consider the following:

• Choose your co-owner or co-purchaser carefully.
• Are they financially stable and trustworthy?
• Can you live with this person or persons?
• Are you all agreeable in signing a legal co-ownership agreement
• Are you agreeable to establish a joint banking account for expenses

Benefits of Buying Property in Joint Names.

Further to the above paragraph, the benefits of buying or purchasing a property in joint names, are;

• To purchase a higher priced property than on a single income,
• To share your partner’s deposit whereas you may not have enough deposit,
• Your single income is not enough to service the loan,
• To share resources with another partner to build equity to invest in more properties
• To increase your borrowing capacity to purchase a bigger or better quality property.
• All property expenses are shared between co-owners

Benefits of Buying Property in Tenants In Common.

Similar to purchasing a property in joint names, the benefits are the same as above, are:

• To give more flexibility form of property ownership
• To divide the equity share to the deposit contributed.
• To allow shareholders to purchase unequal shares in a property
• To invest in a property with a small equity percentage in an investment

Do we register a property as Joint Tenants or Tenants in common?

It is important to understand that these co-purchase options have different legal ramifications for each purchaser and borrower against the loan.

• Joint Tenants ~ the property is in the names of two or more persons, where all persons have an equal interest in the whole property. When one person dies the property passes to the survivor(s).  They are known as Joint Tenants or Joint Proprietors of that property. A Joint owned property cannot be sold by the other party acting on their own.

For example, a Joint Tenants purchase is usually done with married couples or parent and child and if one person dies the rights to the property are assigned to the other joint tenant.

• Tenants in Common ~ the property in the names of two or more persons and in which each has a separate and distinct share as a percentage which can be equal or unequal in the same property. When one person dies his or her share is not passed to the survivor’s but becomes part of his or her estate for disposal according to his or her will. Meaning, as Tenants in Common the one that has passed away can leave his or her share in the property to anyone they like, this, however, requires a Will to be in place.

For example, a Tenants in common purchase are undertaken for investment purposes, as each investor has a share, each may be entitled to sell off their share as one would in owning shares in a company.

Each person has the right to Sell, Lease or Mortgage their share of the property without an agreement from the other shareholders, however, if a lender has a Mortgage over the security the incoming shareholder would need to be a party to the loan or mortgage and show beneficial interest

Should we sign a Co-Ownership agreement?

Securing your long-term financial security is very important therefore we would recommend that you seek the right legal advice since each purchaser financial commitments are different and a well-designed co-ownership agreement or contract would set out the rights and responsibilities of each purchaser or owner.

What happens if a co-purchaser defaults on the loan payments?

When you buy a property together you become co-borrowers on the same mortgage, which means that each borrower is “jointly and severally liable” for the home loan. This means that if one person defaults on the home loan, the other person/s listed on the mortgage will be held responsible.

Outline of a good Co-Ownership Agreement or contract.

A good Co-Ownership contract should include the following;

• An approved checklist of who can reside in the property and on what terms
• Identifying each individual’s contribution as to share of responsibilities and deposits made
• Mortgage contributions and amounts made by each individual and obligation under the mortgage if a co-borrower fails to make his or her repayments
• A way to divide up the expenses on the property i.e. rates, insurance, etc.
• Who will be responsible for the maintenance of the property
• A checklist of what needs to be done in an event of sale by one borrower or co-owner
• A dispute resolution clause in the event of a dispute amount co-owners

Can I still get the First Home Buyers Grant if buying in Joint Names?

When buying a property with someone else, you will still be able to receive the First Home Owners Grant (FHOG) if all co-purchasers on the mortgage are eligible to receive the FHOG.  If one of the co-borrowers has owned a property prior then the other joint purchaser may not be eligible, therefore we suggest you seek legal advice or contact your local Office of State Revenue. Read more about the eligibility requirements for the First Home Owner Grant.

Should you require further legal information we recommend to discuss these options with your solicitor or conveyancer.