Joint Tenants vs Tenants in Common: What Is the Difference?
One tick box on the contract decides who inherits your share of the house. Most buyers never think about it. Here’s what each option actually does.
What is the difference between joint tenants and tenants in common?
As joint tenants, if one owner dies the survivor automatically gets the whole property, no matter what the will says. As tenants in common, each owner holds a defined share that they can leave to whoever they choose. When two or more people buy together in NSW they have to pick one, and the choice affects tax, inheritance and how the property is dealt with in a blended family.
At a glance
- Which one is the default? Joint tenants. If the contract isn’t marked, joint tenancy applies automatically.
- Which do couples usually choose? Joint tenants, by a long way.
- When does tenants in common make sense? Buying with a friend, buying with unequal contributions, or where either of you has children from a previous relationship.
- Can you change your mind after exchange? Yes, but in most cases you’ll pay stamp duty a second time.
What does buying as joint tenants mean?
Joint tenancy is by far the most common way two people buy a property, usually because they’re buying as a couple.
It is about what happens when one owner dies. On the death of a joint tenant, the survivor automatically receives the deceased owner’s share by law, regardless of what the will says.
If Fred and Mary buy a house as joint tenants and Fred dies, Mary owns the whole property. The will doesn’t come into it.
It is also the default. On the NSW contract for sale of land, joint tenants is shown in block capitals, and if nothing is ticked or crossed, joint tenancy is what you get.
In plain English
Joint tenants means the last one standing owns the lot. Tenants in common means each person owns a slice they can leave to whoever they want.
The trap most people have never heard of
Blended families are common, and one or both owners often have children from a previous relationship. Joint tenancy has a quirk that can disinherit half of them.
If both joint tenants are killed at the same time, say in a car accident, the law treats the younger owner as having survived the older one. In that instant the property passes to the younger joint tenant. If neither has a will dealing with the situation, the home then passes to the children of the younger owner, and the children of the older owner get nothing.
If you’re buying as joint tenants, make sure your will is up to date. The property may not be the only thing that needs it.
What does tenants in common mean?
Tenants in common gives each person named on the contract a percentage of the property. Each co-owner holds a separate share that they can sell, mortgage or leave to anyone in their will.
The shares can be any size, from 1% to 99%. Separate title deeds can issue for each share, and in theory those shares can be sold or mortgaged separately, although that’s difficult in practice.
This is the way unrelated parties usually hold property when they want their own families to inherit their share.
When tenants in common is the better fit
Buying an investment property with a friend. This is exactly what the option exists for. You can hold equal shares, 50/50, or something uneven like 99/1. What suits depends on who is contributing what and how you want the income treated.
A couple who each have children from a previous marriage. Buying as tenants in common in equal shares means each of you owns 50%, and each of you can leave that 50% to your own children.
Owners who want unequal shares. Sometimes a second person has to go on the title for the loan to be approved, but the two of you don’t want equal ownership. Sometimes the split reflects who actually paid what. Either way, if tax is part of the reason, talk to your accountant. We handle the conveyancing, they handle the tax advice.
“Joint tenancy overrides the will. That’s the whole point of it, and it’s also the reason it catches people out.”
Can you change from joint tenants to tenants in common after exchange?
Yes, but it comes at a cost.
If you swap after exchange, in most cases you’ll pay stamp duty again, calculated on the value of the property. That value has to be set by an independent valuer, which you arrange and pay for.
The reason is that Revenue NSW treats the change as a sale of the property.
The short version
Most property is bought as joint tenants and for most couples that’s the right answer. If you’re buying with a friend, contributing different amounts, or either of you has children from a previous relationship, tenants in common is worth a conversation.
Have that conversation before you exchange, not after. Changing your mind later is expensive.
Not sure which one suits you?
Ask us before you sign. Justin, Julie, Amanda or Nicole will walk you through what each option means for your situation.
