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There are a number of ways property can be owned, but two common methods of ownership are:

a) Joint Tenants; or

b) Tenants in Common

What are the differences and how does the method of ownership affect me?

Joint Tenants

Joint tenancy occurs when two or more people own property in its entirety and neither person owns a defined share. On the title of your property your names will be displayed as:

“John Smith and Mary Smith”

On the death of John Smith, the property will be transferred “by survivorship” to Mary Smith. A lawyer will be needed to formalise the transfer, but this transfer is effectively automatic.

Accordingly, it is often married couples that decide to own their property as joint tenants because both partners wish to have the property transfer to their surviving partner if one of them dies. Property owned by joint tenants usually do not form part of a deceased’s estate – this typically results in the estate administration for the first spouse being more cost and time efficient.

Tenants in Common

Owning property as tenants in common allows entities to own a property in equal or unequal shares. On the title of your property your names will be displayed as:

“John Smith as to ½ share and Mary Smith as to ½ share”

OR

“John Smith as to 4/10 share and Mary Smith as to 6/10 share”

On the death of John Smith, John’s undivided share in the property will not transfer “by survivorship” (i.e. automatically) to Mary. Instead, John’s share in the property will be transferred in accordance with his will.

Ownership as Tenants in common is a common ownership choice for de facto partners, business partners, friends or family members who a purchasing a property together. Joint tenants may not be appropriate in these circumstances because you may not want your “share” in the property going to your business partner or friend after your death.

If you are purchasing a property with your de facto partner and decide that owning the property as tenants in common is the correct decision for you, you will also need to obtain advice from your solicitor on whether a Contracting Out Agreement in accordance with the Property (Relationships) Act 1976 should be entered into. This is especially important if Mary wanted to protect her larger deposit as her separate property. Her larger deposit may be reflected in the percentage of ownership, an example is provided below:

“John Smith as to 4/10 share and Mary Smith as to 6/10 share”

If you are purchasing a property with your business partners, friends or family member, you should also obtain advice about whether a Property Sharing Agreement should be entered into to govern the parties ownership, maintenance, outgoing contributions and the sale of the property. An important consideration when purchasing a property with your friend is if your friend was to pass away, your friends share will be distributed in accordance with your friend’s will or in accordance with the rules of intestacy if your friend does not have a will. Your friend may choose to give their estate (including your friends 4/10 share in the property) to their sister who you do not get along with. The result – you end up owning a property with someone you never intended to own property with. This may lead to disputes which can be costly.

If you would like legal advice as to the best way to own your current property or a new property please contact us on info@lockhartmuir.co.nz or call us on 09 3651056 and speak to one of our lawyers.