Severing Joint Tenancy

Property Ownership - Joint Tenants vs Tenants in Common and Severing a Joint Tenancy

When you own property with another person (or multiple other people), ownership of the property is either held by the co-owners as 'joint tenants' or as 'tenants in common'.

When a property is held as ‘joint tenants’, the rule of survivorship applies and all joint tenants hold their combined share of the property collectively (ownership not divided into distinct shares). The rule of survivorship means that when a joint tenant passes away, their interest will automatically pass to the surviving joint tenant(s), regardless of any provisions to the contrary in their Will. It is only when the last remaining joint tenant (who will have become the sole owner) passes away that the property can be gifted under a Will.

When a property is held as ‘tenants in common’, the co-owners each hold a distinct ownership share in the property. If one of the co-owners passes away, their share does not automatically pass to the surviving co-owner(s).  The future ownership of their share in the property will be dictated by either their Will (if they have a valid Will in place), or the by the rules of intestacy (if they do not have a valid Will in place).

If it is not your intention for your interest in a property to be automatically transferred to other co-owner(s) when you pass away, it is important that you ensure that your interest in the property is held by you as a ‘tenant in common’ with your co-owners and that you have a valid Will in place which reflects your wishes. If you hold an interest in a property as ‘joint tenants’ and you do not want your interest in the property to automatically pass to your co-owner(s) upon your death, it is vital that you sever the joint tenancy as soon as possible.

Common reasons for wanting to sever a joint tenancy

• In the event of spouses separating, it may no longer be their intention that the surviving spouse receive the deceased spouse’s share of the property upon their death. By severing the joint tenancy, the parties can direct who is to receive their respective interests in the property upon death by addressing this in their Wills.
• In the case of second or subsequent relationships where parties have children from prior relationships, it may be their intention to leave their share of the property to their respective children, rather than to leave their interest in the property to their current spouse. If this is the case and the property is owned with the spouse as ‘joint tenants’, it will be necessary to sever the joint tenancy and deal with the intended ownership of the property on death by Will.

Requirements to sever a joint tenancy

• In order to sever a joint tenancy, paperwork must be prepared in the prescribed form, signed in the presence of a qualified witness and lodged with the Department of Resources.
• A joint tenancy can either be severed by mutual consent (that is, with the consent of all joint tenants), or it can be severed unilaterally (without the consent of the other joint tenants) provided the other joint tenants have either been given a copy of the paperwork to be lodged with the Department of Resources severing the joint tenancy, or given written notice of the intention to sever the joint tenancy.
• Provided the share each person holds in the property remains the same, no transfer duty will be payable as a result of the severance of the joint tenancy. For example, if Person A and Person B own a house together as joint tenants, no transfer duty will be payable provided Person A and Person B each hold a 50% share of the property once the ownership of the property is converted to a tenancy in common.

If you require advice or assistance with respect to severing a joint tenancy or the various forms of property ownership in general, please do not hesitate to contact one of our commercial solicitors on (07) 4963 2000 or via the link below.