What is a difference between joint ownership and tenants in common when buying a property?

A couple who had met later in life bought a home together.  They both had children from previous relationships.  

Before signing the legal documents for the purchase, their lawyer asked them how they wanted to own their new property and they said they wanted “joint ownership” (known legally as joint tenancy). 

Their lawyer pointed out that this would mean if one of them passed away the property would go to the survivor, who would then be able to leave the property to their own children to the exclusion of the deceased owner’s children if they chose to.  

This was not what they wanted, so they elected to instead be ‘tenants in common’ as to 50% share each, and to make sure they were clear in their

Wills about what would happen to their share of the property on their death.

When you buy a property your lawyer will ask you how you want to own the property and will explain the options.  For individual ownership, the options are:

• Joint Ownership – on the death of one party the property automatically passes to the survivor/s.  You may not want this to happen, especially if you are in a subsequent relationship as it would mean children of a prior relationship will not inherit their parent's share in the property, as above.
  
  
• Tenants in Common – this means you own a specified share in the property, either in equal or unequal shares.  You can leave your share in the property to beneficiaries named in your Will.  Sometimes this might also involve leaving a ‘life interest’ in the property allowing the other spouse or partner to continue to live in it for their lifetime.

If buying with friends or family (other than your spouse/partner) owning the property as tenants in common is also another way to show/record the division of sale proceeds on sale if one of you has put in more cash towards the purchase than the others. If buying with a spouse or partner then simply recording different shares of the title will not be sufficient; you would need a relationship property agreement (pre-nup) to ensure any arrangement to divide the property on death was binding.

There are other options such as trusts and companies.

How you own the property has a far-reaching effect on your asset planning, so you need to ensure you fully understand the options before committing to an ownership structure.  It pays to discuss this with the legal advisor assisting with your property purchase.