Real estate is one of the most valuable assets people own during their lifetime and therefore needs careful consideration as part of an estate plan. Owners don’t always realise that real estate may not always pass pursuant to their Will.
The two methods of holding joint property
Where two or more people own property, they can hold it jointly as joint tenants or as tenants-in-common. The mode of ownership is significant and dictates what happens to the property on the death of one of the joint owners.
Owning a property as joint tenants means that when one of the joint owners dies, the property automatically passes to the surviving joint o
wner(s), irrespective of what is in the deceased person’s Will.
If a property is owned as tenants-in-common, when one of the joint owners dies the interest that person holds in the property does pass in accordance with their Will, or if the person has no Will, in accordance with the laws of intestacy.
It is more common for property to be held as joint tenants. In fact, joint tenancy is the default position applied by the Lands Titles Office if no specific mode of ownership is specified when a property transaction is registered.
Owning property as joint tenants may be suitable, and in fact preferable, for many people, however, difficulties can arise if circumstances change. For example, in the event of a relationship breakdown the parties may no longer want their share of the property to pass automatically to their estranged spouse or partner upon their death.
Can the ownership structure be changed from joint tenants to tenants-in-common?
The short answer is yes, but there can be complications. The simple option is where both parties agree to the change. In that case, the necessary documentation can be prepared and signed and the change of mode of holding registered on the title at the Lands Titles Office. However, the process is more difficult and complex when the other party won’t consent to the change.
Is it possible to proceed with the change of ownership from joint tenants to tenants-in-common without the other owner’s consent?
It is possible to apply to the Lands Titles Office to have the ownership changed from joint tenants to tenants-in-common without the consent of the other property owner(s). Once registered at the Lands Titles Office, a new certificate of title will be issued showing the registered owners as tenants in common (expressed in parts such as “1/3”).
However, owners should proceed with caution in this situation. To date there is no Court decision in South Australia that confirms that unilaterally changing the mode of holding is effective.
Other jurisdictions in Australia have laws that expressly deal with the scenario of one joint owner changing the mode of holding from joint tenants to tenants-in-common, and there are some interstate Court decisions. Unfortunately case law determined by the Courts in other jurisdictions in Australia, while persuasive, is not binding in South Australia.
While there is a need for clearer laws and regulations in this area in South Australia, it is worth remembering that currently there is a risk in that a person may believe their property will pass according to their Will, but in reality it may not.
If you are in doubt about the mode of holding for any jointly owned property you have, and want to confirm what implications this has on your Will, we would encourage you to seek advice from an experienced estate planning lawyer. You can contact a member of our estate planning team by calling (08) 8414 3400.