Joint tenancy vs tenants in common
Purchasing property with a partner can be an exciting time in life, however, it is important not to overlook what kind of method of ownership you should use.
When two or more people purchase property together, they can own the property as joint tenants or tenants in common.
Joint tenancy allows for two or more co-owners to own an asset, each with an equal interest in the property. Each joint tenant has an undivided interest in the property, therefore your share cannot be left to beneficiaries in your Will, rather the surviving party or parties will receive ownership of the property.
Tenants in common operate differently, whereby each owner has a separate and distinct interest in the property. Tenants in common may hold unequal interests in the property, for example, one may hold a 25 per cent interest and the other a 75 per cent interest.
The main difference between joint tenancy and tenants in common is what happens upon the owner’s death. The autonomy of the tenants in common structure allows the owners to leave their share of the property to their chosen beneficiary in their Will. This automatic transfer of property does not exist for those who jointly own a property.
Regardless of the two structures, CGT can still apply to the sale of the property. Joint tenants are treated as tenants in common that have equal shares in the asset. Each party therefore has an equal share of any capital gain or capital loss made when selling the property.
Those who own property as tenants in common make a capital gain or loss that is in line with their interest. For example, a couple who has split their property’s interest in a 20/80 per cent ratio will split the capital gain or capital loss made according to that interest when the property is sold.