Many people purchase a property with a spouse, or partnership with either a friend or family member to get into the market.
When buying a property with two or more persons in NSW, the buyers need to consider if they register the ownership as joint tenants or tenants in common.
Joint Tenants
When a property is owned by joint tenants, means everyone named on the title will own the whole property together. and right of survivorship applies, meaning if one of the owners dies, the deceased’s person’s interest in the property will pass onto the remaining joint tenant(s). and the deceased’s interest in the property will not form part of their estate upon death, meaning the deceased, cannot gift this interest to other beneficiaries under a Will.
Tenants in Common
When a property is owned by tenants in common, each owner on the title will own a share in the property, and the share in the property can form part of their estate upon the death of the owner, and he/she can dispose of the share in the property under the Will.
The share owned by each of the owners can be equal, eg 50/50, or unequal in whatever proportions the owners decide. When one owner contributes more of the purchase price than the other owner(s), the buyers normally wish to record their contribution in the ownership proportions on the title.
Pros and Cons of Joint Tenants & Tenants in Common
The process of transferring the property to the surviving joint tenant is much less expensive and quicker than the process of transferring the interest in the property under a Will from the deceased owner to the other owner(s). When transferring the property to the surviving joint tenant, a Notice of Death is required and need to be registered with the Land Registry Services to move the property into the name of the survivor, while transferring the interest in the property under a Will, a grant of probate is required.
When to decide
Buyers need to decide how to record ownership before exchanging contracts for the purchase as this is recorded in the Contract for Sale.
Change the type of ownership
Owners can change the type of ownership of the property due to a change of circumstances, eg, separation or divorce, dispute, or just simply because the type of joint tenants is no longer suitable.
“Severance” is the process of changing the ownership from joint tenants to tenants in common.
“Severs” the joint tenancy is the process, of making you and another property owner (s) tenants in common. This will allow the distribution of your share in the property under your Will upon death.
There are two ways to change the type of ownership. Registering a “Transfer Serving Joint Tenancy” with the NSW Land Registry Service, this Transfer only requires one owner to sign.
The NSW Land Registry Service then will notify the other joint tenant(s) in writing before the Transfer is registered.
The Second option is Registering a “Transfer Altering Tenancy” with the NSW Land Registry Service, this transfer requires all joint tenants to sign.
A Transfer Altering Tenancy will be normally quicker because the NSW Land Registry Service does not need to notify the other property owners.
Stamp Duty
No stamp duty is payable, and the transfer need not be marked for changes in tenancy, from joint tenants to tenants in common in equal shares or from tenants in common in equal shares to joint tenants with State Revenue.
PEXA
The NSW Land Registry Service no longer accepts any lodgement concerning the property, most land-related lodgements are done via PEXA. PEXA is a secured online platform that allows property settlement to occur in a digital workspace in Australia.
Please speak to CFS Legal experienced Property Lawyers in confidence as to purchasing the property. Email: info@cfsflegal.com.au