In the realm of property ownership, understanding the intricacies of how multiple individuals can co-own a property is paramount. Among the various forms of co-ownership, the concept of “tenant in common right to occupy” stands out, often juxtaposed with its counterpart, “joint tenant.”
At its core, a tenant in common holds a specific, individualised share in a property. This share might be equal to or different from the shares of other co-owners. Such a form of ownership not only defines the rights of each co-owner but also delineates their responsibilities, especially when it comes to occupying the property.
As property markets evolve and more people opt for shared ownership, the nuances of being a tenant in common become increasingly relevant.
Whether you’re a seasoned property investor or a first-time buyer considering a joint purchase, grasping the rights, including the right to occupy, and the potential challenges of being a tenant in common is crucial.
This article aims to shed light on the concept of tenancy in common, its comparison with joint tenancy, and the rights and responsibilities that come with it.
Understanding Tenancy in Common
Tenancy in common is a prevalent form of co-ownership, especially when individuals wish to invest in property without the constraints of equal ownership. In this setup, two or more individuals possess distinct shares in a property.
Unlike joint tenancy, where each party holds an equal stake, tenants in common can own unequal portions. This could be based on their initial investment or a mutual agreement.
For example, one party might own 70% of the property due to a higher financial contribution, while the other holds the remaining 30%.
These ownership percentages are not just symbolic; they play a pivotal role in determining the distribution of rental income, the division of expenses, and the allocation of proceeds if the property is ever sold.
One significant aspect that differentiates tenancy in common from joint tenancy is the lack of the “right of survivorship.” In a joint tenancy scenario, if one owner passes away, their share is automatically bequeathed to the surviving owner(s).
However, under tenancy in common, the deceased’s share doesn’t follow this path. Instead, it integrates into their estate and is then distributed based on their will or, in the absence of one, the prevailing laws of intestacy. This distinction can have implications on estate planning and should be considered when evaluating rental minimum standards.
Rights and Responsibilities of Tenants in Common
Owning a property as a tenant in common comes with a set of rights and responsibilities. Foremost among these rights is the “right to occupy.” Regardless of the size of their stake, every tenant in common is entitled to occupy and utilize the entire property.
“This means a co-owner with a mere 20% stake still has the right to use the whole property. However, this right doesn’t extend to excluding other co-owners from any portion of the property.”
On the flip side, responsibilities often encompass the financial aspects of property ownership. All co-owners are generally accountable for the property’s ongoing expenses.
This includes calculating and covering water bills for tenants, ensuring maintenance, paying taxes, and servicing any mortgage on the property.
Typically, these costs are divided based on each co-owner’s stake in the property. So, a co-owner with a 60% share would conventionally shoulder 60% of these expenses. However, co-owners can deviate from this norm through mutual agreements.
Joint Tenancy vs. Tenancy in Common
While both joint tenancy and tenancy in common are forms of co-ownership, they come with distinct characteristics and implications. In joint tenancy, all co-owners have an equal share in the property. This means that if there are three joint tenants, each owns a third of the property.
A defining feature of joint tenancy is the right of survivorship. If one joint tenant dies, their share automatically passes to the surviving joint tenants. This can be advantageous for ensuring a property remains within a family or a close-knit group.
“Tenancy in common allows co-owners to hold different percentages of the property. This flexibility can be beneficial when co-owners contribute different amounts towards the property’s purchase.”
Unlike joint tenancy, there’s no right of survivorship in tenancy in common. When a tenant in common dies, their share goes to their heirs or as dictated by their will. This can sometimes lead to disputes, especially if the deceased’s beneficiaries want to sell the property while the other tenants in common don’t.
Agreements and Disputes Among Tenants in Common
Given the potential for disagreements among tenants in common, it’s often wise to have a co-ownership agreement in place. This agreement can outline each owner’s rights and responsibilities, detail the division of expenses, and provide a roadmap for resolving disputes.
Disputes among tenants in common can arise for various reasons. In some cases, if a resolution can’t be reached, one co-owner might seek a partition of the property.
This legal action can result in the property being physically divided (if feasible) or sold, with the proceeds distributed among the co-owners based on their respective shares.
Rights and Responsibilities of Tenants in Common
When individuals decide to purchase a property as tenants in common, they inherently agree to share certain rights and responsibilities.
One of the primary rights is the ability to occupy and use the property. Each tenant in common has the right to possess and enjoy the entire property, regardless of their ownership percentage.
However, with rights come responsibilities. All co-owners are typically responsible for property expenses, such as mortgage payments, property taxes, and maintenance costs. The distribution of these expenses is usually proportional to each co-owner’s share in the property.
Implications for Property Sales and Transfers
When a tenant in common decides to sell their share, they can do so without the consent of the other co-owners. However, the buyer would step into the shoes of the selling tenant in common, inheriting the same rights and responsibilities.
In cases where one tenant in common wants to sell the entire property, but others don’t, the selling party might seek a partition action, as mentioned earlier.
Another crucial aspect to consider is the transfer of property shares upon a tenant in common’s death. Unlike joint tenancy, where the right of survivorship applies, a tenant in common’s share doesn’t automatically go to the other co-owners.
Instead, it’s passed on to the deceased’s heirs or as specified in their will. This can have significant implications, especially if the beneficiaries are unfamiliar or not on good terms with the existing co-owners.
Deep dive: Learn more about the best practices for rental property upkeep in our property maintenance guide for landlords.
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FAQ Section on ‘Tenant in Common Right to Occupy’
What happens when one of the tenants in common dies Australia?
When one of the tenants in common dies in Australia, their share of the property becomes part of their estate. This means that their share of the property will be distributed to their beneficiaries in accordance with their will.
If the deceased tenant in common did not have a will, then their share of the property will be distributed to their next of kin in accordance with the intestacy laws of their state or territory.
What are tenants in common rights NSW?
Tenants in common in NSW have the following rights:
- The right to possess and use their share of the property.
- The right to transfer their share of the property to another person.
- The right to receive their share of any rental income from the property.
- The right to contribute to the expenses of the property.
- The right to force a sale of the property.
What’s the difference between tenants in common and joint tenants?
The main difference between tenants in common and joint tenants is the right of survivorship. With tenants in common, there is no right of survivorship.
This means that when one tenant in common dies, their share of the property does not automatically pass to the other tenants in common. Instead, their share of the property becomes part of their estate and is distributed to their beneficiaries in accordance with their will.
With joint tenants, there is a right of survivorship. This means that when one joint tenant dies, their share of the property automatically passes to the other joint tenants.
What are tenants in common rights in South Australia?
Tenants in common in South Australia have the same rights as tenants in common in NSW.
What is equally as tenants in common?
Being equally as tenants in common means that each tenant in common owns an equal share of the property. However, it is important to note that tenants in common can agree to own different shares of the property.