Severing a joint tenancy
A lot of couples hold their ownership in real estate as joint tenants. If a separation occurs that can prove a problem as the law provides that if one of the “joint tenants’ dies their share automatically gets transferred to the other ‘joint tenant’. So, what can be done about it?
There are two ways that couples can own real estate, either as “joint tenants” or “tenants in common”. When couples separate, they may need to consider what arrangements are in place.
Joint tenants together own the whole property. Owning real estate as “joint tenants” means that if one of the parties dies then their half interest in the property automatically passes to the other owner regardless of the provision in their Will.
Tenants in common:
Tenants in common each own their individual share in the property absolutely. They may hold their respective shares equally or in some other proportion.
If someone holds an interest as “tenants in common” and they die, then the future ownership of their entitlement will be determined in accordance with their Will.
A tenancy in common may be the preferred way for a couple to own property where there are children of prior relationships whose interests have to be protected. It is quite common for de facto couples and for investors buying property together to own their property in this way.
Severing a joint tenancy:
Most couples hold property as “joint tenants”, therefore if separation occurs people may wish to look at severing the joint tenancy. A joint tenancy may also be used where a property is held in trust or in certain business situations. Severing the joint tenancy is a straight-forward process that then creates a “tenants in common” ownership. To do this, the consent of the other party is not necessary.
Severing the joint tenancy does not attract stamp duty. It is a process that goes through the Titles Office. The other owner of the property and any mortgagee are notified that the form has been lodged and are given the opportunity to object.
However, we note that severing a joint tenancy is not for everyone and may create hostilities between parties that inflame other matters and lead to delays in finalising or settling a property settlement. It is therefore important to obtain specialist Family law advice in considering your circumstances and whether it is appropriate and to help you establish a plan.
We offer a fixed-fee, no obligation initial consultation. Please contact us on (07) 3221 4300 to arrange an appointment.