Buying a property with someone else is a great way to share the fun, stress, and cost of the venture. Often people buy a house with their significant other, to make a home or invest together. Others buy property with friends, relatives or business partners. Joining forces with someone else can increase your borrowing power, and pooling savings can bring a deposit within reach.

However, there are pitfalls to buying a property with someone else, so it is better to think about these issues upfront and take steps to ensure that everyone is protected.

Joint Tenants or Tenants in Common?

One of the fundamental questions is how the property will be held. During a purchase, buyers are asked if they want to be registered as “joint tenants” or “tenants in common”. It is important not to rush this choice as it has a significant effect, and everyone involved needs to be comfortable with the choice.

The most common form of property ownership is joint tenancy. This means that both people own the property, and neither can sell or transfer their “share” to another person. If one of the owners dies, the property will automatically belong to the surviving owner. In that case, it is not possible for one of the owners to make testamentary arrangements to leave their “share” of the property to another person.

Joint tenancy is common for couples who own a family home together, but it is not the right choice for every couple. For instance, some couples may wish for their share of a home to benefit their children, rather than their spouse, particularly if they have children from a previous relationship.

In contrast, if a property is held as tenants in common, the owners each possess a distinct share in the property. A share can be gifted through a will to another person, other than the co-owner.

One of the advantages of tenancy in common is the shares can be held unequally. Imagine three siblings decide to buy a property. If the three siblings contributed to the purchase of the property equally, they can hold the property as tenants in common in equal shares.

But if one sibling contributed more than the other siblings, this additional contribution can be reflected in an unequal holding. For example, if one sibling puts up the whole deposit, it may be fair for them to own 50% of the property, while the siblings who contributed nothing up-front(but who will contribute to the mortgage and ongoing costs) each hold 25% of the property.

It is also possible to have a mix of joint tenants and tenants in common. For instance, if a couple decide to pool their resources with a friend to buy a property, the couple can be joint tenants as to their share, while the friend is listed as a tenant in common. This means that if one of the couple dies, their spouse will receive their share of the property by survivorship, while the ownership of the friend remains unchanged.

Potential Issues of Buying with Someone Else

Unfortunately, the best laid plans do not always work out. Relationships break down, people die, are sued, and go through bankruptcies. Any of these circumstances can complicate the co-ownership of a property.

Broadly speaking, joint tenancy is the best arrangement for couples who want their spouse to own the whole property if either of them die. The change of ownership is automatic and only requires a survivorship application to be lodged with Landgate, the Western Australian land information authority.

People at risk of bankruptcy or being sued sometimes think that holding property in joint tenancy will protect the asset. This is not correct. A court can order a joint tenancy to be severed, the ownership apportioned equally between the owners, and the share of the property owned by the debtor sold. In fact, a tenancy in common may offer greater protection in such scenarios, because the debtor may own less than 50% of the property.

How TLS can help

The lawyers at TLS can advise you regarding which co-ownership of property options best suit your circumstances and estate planning objectives.

If you or someone you know wants more information, or needs help or advice regarding co-ownership of property, please feel welcome to contact us on 08 6383 5551 or email re*******@*ls.law.