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The different types of home ownership and how they affect you

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Ben Coleman
10-Dec-2017
Asset planning

When purchasing property it is important to understand the legal implications of ownership structure and how it may affect you in the future.

There are two core forms of ownership which are joint tenancy and tenants in common.

A joint tenancy occurs when two or more people purchase a property together and own it in undefined shares. In this scenario, the title to the property will simply show the names of the owners of the property without reference to corresponding defined shares. For example, if Mr & Mrs Jones purchase a home as joint tenants, the title will show: Barry Jones and Ethel Jones as the property owner.

In a joint tenancy, the consent of all owners of the property is required if the property is to be encumbered, for example, with a mortgage in favour of a bank.

The effect of a joint tenancy on death of one of the owners is that the property passes automatically to the other by virtue of survivorship.

This form of ownership is most commonly appropriate for when married couples purchase a home.

A tenancy in common occurs when parties buy a property in defined shares which or may not be equal. For example, if siblings Tom, Sarah and Lucy Brown buy a home as tenants in common in equal shares, the title will show: Tom Brown as to a 1/3 share, Sarah Brown as to a 1/3 share and Lucy Brown as to a 1/3 share as the registered proprietor.

In this structure, the consent of each owner is not required when one owner wants to encumber his or her share of the property.

Upon death of one of the owners, his or her share of the property will pass directly to whomever the deceased has willed it to.

Tenancy in common is an effective form of ownership when family members, friends, business associates or new couples purchase a home. It allows the share of ownership to be clearly defined on the title according to each parties contribution to the property, so that on sale, the proceeds are split according to the shares of ownership.

The most appropriate form of ownership will very much depend on people’s personal circumstances, and for couples, the Property (Relationships) Act 1976 should always be carefully considered.

As seen in The Oamaru Mail.