Tenants in common vs joint tenants: What's the difference?

When buying a property with one or more people, there are typically two ways an ownership agreement can be structured. We take a look at what those two terms mean.

Co-ownership – or buying a property with one or more people sharing in that purchase – is a common practice in Australia. How that ownership agreement is legally structured can have ramifications for the future, according to the Australian Tax Office (ATO), in areas such as tax and how the asset is distributed to surviving co-owners if one of the owners passes away.

Typically, co-ownership of a property is arranged in one of two ways: ‘tenants in common’ or ‘joint tenants’, according to the ATO.

What does tenants in common mean?

‘Tenants in common’ describes a type of property co-ownership structure, typically arranged by a legal professional. When a property is owned by ‘tenants in common’, this means that if one of the owners dies, their share of the co-owned asset goes to their deceased estate, and typically goes to that estate’s beneficiaries. The shares owned can be equal or unequal. This term should not be confused with ‘co-tenants’, which describes a group of people who rent out a property, rather than own it.

What does joint tenants mean?

‘Joint tenants’ is another type of property co-ownership structure, typically arranged by a legal professional. When a property is owned by ‘joint tenants’, this means that if one of the owners dies, the deceased co-owner’s share of the property goes to the other co-owners of that property. There’s a right of survivorship, and the property is not considered as an asset in the deceased co-owner’s deceased estate.

There are possible tax implications for both these types of co-ownership structures, according to the ATO. There may also be legal implications. It could be a wise idea to seek professional advice, such as from a financial adviser.

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