Quick Summary
This article explores Tenancy in Common, one of Australia’s main forms of property co-ownership. It explains how ownership shares work, when this structure is beneficial, and what borrowers and lenders need to consider before purchasing property as tenants in common.
What Is Tenancy in Common?
Tenancy in Common allows two or more people to own a property together, with each holding a defined and distinct share.
Unlike joint tenancy, ownership shares can be unequal for example, 60/40, 70/30, or even 99/1 depending on each party’s financial contribution.
When one owner passes away, their share becomes part of their estate and can be transferred according to their will, rather than automatically going to the other co-owners.
What Does “Tenants in Common” Mean?
Under a Tenants in Common arrangement:
- Each co-owner holds a separate and clearly defined share of the property.
- Ownership shares can be equal or unequal (e.g. 50/50, 70/30, or any proportion agreed upon).
- If one owner passes away, their share does not automatically go to the other owner(s). Instead, it can be left to beneficiaries specified in their will.
Benefits of Owning Property as Tenants in Common
This structure is ideal for situations where owners want flexibility or control over how their share is handled in the future, such as:
- When there are children from previous marriages or relationships.
- When friends, family members, or business partners buy property together and wish to protect their individual share.
- When each party contributes different amounts towards the purchase and ownership needs to reflect that.
Owning as Tenants in Common allows each person to independently control their share including how it’s passed on in their estate.
Important Considerations for Borrowers
When a property is used as security for a loan, all owners must be legally involved in the finance.
This means:
- Each owner must be either a co-borrower or a guarantor on the loan.
- Even though ownership shares may differ, all parties are jointly and equally liable for the loan repayments.
Why?
Technically, each share is a separate asset, but in practice, a lender can’t sell just one share of a property to recover debt. If the loan falls into default, the bank would likely need to sell the entire property to recover the outstanding balance.
Is This the Right Ownership Structure for You?
The way you choose to hold property has long-term financial and legal implications especially for estate planning and loan structuring.
How Pinpoint Finance Helps
At Pinpoint Finance, we help structure loans for co-owners to ensure the finance setup supports each person’s ownership share and long-term goals.
We’ll also coordinate with your solicitor to ensure the title structure, co-ownership agreement, and loan terms all work in harmony.
Contact us at info@pinpointfinance.com.au to discuss co-ownership lending or to review your title structure.