Two or more people own property as tenants in common, which means they have co-ownership of the property in defined shares, which can be disposed of independently. The ownership interests among co-owners may be unequal, eg one person holds 30% while another two hold 30% and 40%.
If the co-owners decide to sell the property, the proceeds should be distributed according to their respective shares. Unlike joint tenancy, tenants in common do not have a right of survivorship, which means that if one co-owner passes away, their interest in the property does not automatically transfer to the other co-owner. Thus If the co-owner dies, their share in the property becomes an asset of their deceased estate, the interest in the property can be either transferred to the beneficiary of the estate or sold by the executor/administrator.
Property Rights of Tenant in Common
Dividing Property
Tenants in common could physically divide up the property according to their share. Usually, a separate agreement or contract defines their ownership and responsibilities.
Granting Interest to Other Parties
Tenant in common has the right to sell, mortgage or lease their share of the property. they can do this without the agreement of the other tenants.
Each co-owner has the ability to grant interests in the property to another person through sale or transfer. However, such interests must not interfere with the rights of the other co-owner. If the grant of interest does affect the other co-owners rights, both parties need to agree on the grant.
Sole Occupation of Land
All co-owners have the right to occupy the property. If one co-owner occupies the property exclusively, the aggrieved owner may be entitled to compensation by way of an occupation fee.
Dealing with the entire property
Although each co-owner can deal with their share of the property individually, they may face restrictions when it comes to dealing with the entire property. For instance, a co-owner with a 30% share cannot subdivide their portion without the agreement of the other co-owners, as it would affect their rights to possess and use the property as a whole.
Sell the entire property
When a tenant in common wants to sell the entire property, they can choose between partition or sale. Partition involves dividing the property into separate sections, making each co-owner the sole owner of their designated portion. However, courts often favor outright sales over partitions unless there are compelling reasons for a partition.
Selling the property allows each tenant in common to benefit from the proceeds. After deducting any costs like existing mortgages, the sale money is distributed among the co-owners based on their respective shares.
Conclusion
It’s important for tenants in common to understand their rights in the property they co-own. However, property laws may vary depending on the location (state or territory) of the property, so seeking legal advice is recommended, especially if there are disputes or difficulties in reaching an agreement among the co-owners.
Speak to CFS Legal dedicated lawyers in confidence for property advice. Email: info@cfslegal.com.au.