Choosing the Best Property Ownership Structure for You

When two or more people own a property together, there are three main ownership structures they can choose from;

  1. Joint tenancy;
  2. Tenancy in common; or
  3. Trustee.

It is important to know which structure is best for you to ensure you get it right the first time and avoid additional costs.

Joint Tenancy

Joint tenancy is one of the options for ownership structure. It provides property ownership to tenants in equal shares. A key feature of this structure is the right of survivorship. This provides that on the death of either party, that tenant’s share passes automatically to the other, regardless of the provisions in their will. This means, joint tenants cannot leave the property in their will. For this reason, this structure is commonly held by married and de facto couples.

Tenancy In Common

The second option for property ownership structure is tenancy in common. This structure allows for property to be owned in defined shares, for example two people may own the property with one owing 80% and the other person owing 20%. Unlike joint tenancy, tenancy in common allows for shares to be transferable. This means, ownership in the property can be entered into at a later date or left in a tenants’ will. 

Trustee

Trustee is the third option for property ownership structure. The trustee structure allows for land to be registered in the name of a trustee for the benefit of a beneficiary. Unlike other ownership types, the person holding legal title in a trustee structure does not benefit from the profit of the property. The trustee must act for the benefit of the beneficiary.

To purchase a property as a trustee you must provide either:

  1. An original form 20 which your solicitor may draft on your behalf;
  2. A certified copy of your trust deed; or
  3. All original documents that create the trust.

Potential Issues With Ownership Structures

It is important to identify why certain ownership structures may be wrong for you at the outset. Firstly, tenancy in common allows for property to be left in a tenant’s will. This can be problematic if a tenant has died intestate because their interest in the property remains. If this is the case, the rules of intestacy govern the distribution of the deceased persons estate. This involves the estate being transmitted to the deceased’s personal representative who will then lodge for registration of those who are rightfully entitled to the estate.

Secondly, joint tenancy can potentially go wrong. Holding land by way of joint tenancy means there is no separation of ownership and shares are unable to be divided. Married and de facto couples often choose this structure, however this can become problematic if one party decides to leave the relationship. This is because in the event of death, separated couples may not want the other party to gain their share in the property. It is possible to resolve this issue by severing the joint tenancy and converting it to a tenancy in common. This will allow for each party to have separate and defined ownership in the property.

Underlying Costs

The process of purchasing a property is costly, however choosing the wrong ownership structure may lead to additional fees that could have been avoided. For example, transfer duty is the tax payable by the buyer on all property purchases. This means, if you purchase property as an entity and decide a month later to change that ownership to 2 individuals as joint tenancy, transfer duty will have to be paid twice. This can be quite significant as transfer duty is calculated using the purchase price of a property. For example, if a property is valued at $5,000,000, the transfer duty with no concession would roughly be $260,000. This means a total of $520,000.00 will be spent purely on transfer duty.

Similarly, every property purchase must be documented by a transfer document that is lodged at the Titles Office. The titles registry fee is also calculated using the property purchase price. For example, a $5,000,000.00 property will require a $17,000.00 titles registry fee which would need to be paid again to transfer the property to a different ownership structure.

Lastly, for a transfer of property to a different entity will also involve the review and drafting of documents, completing title searches and arranging settlement with all parties. Therefore, it is important to ensure you have chosen the correct ownership structure the first time round to avoid doubling up on any fees.

If you have any questions about property structures and which ownership type may best suit your needs, then please contact our office on (07) 3876 5111 for an obligation free 20 minute consultation.

Written by
Kayleigh Whittaker, Senior Lawyer
NB Lawyers – Lawyers for Employers
kayleighw@nb-lawyers.com.au
(07) 3876 5111

About the author
Kayleigh Whittaker is a senior lawyer on our Commercial and Property team who assists with Employment Law matters. With a high level of experience in commercial and retail leasing, voluntary and involuntary purchase and sale acquisitions property development and employee relations, Kayleigh provides practical advice to ensure smooth transactions.

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