How does joint tenancy work during a divorce?
Most married couples in Australia have equal ownership over property – items such as real estate, cars, and bank accounts. This means that regardless of the individual contribution made by each owner, all owners own 100% and have the same rights in the property. In other words, they are joint tenants.
A key aspect of joint tenancy is that it carries the right of survivorship. This means that upon one owner dying, their rights over the property automatically pass to the surviving owner regardless of their will.
Difference between joint tenants and tenants in common:
It is important to note that joint tenancy and tenants in common are two separate arrangements. Tenants in common involve two or more people co-owning a property. However, unlike in joint tenancy, the right to survivorship is not present and each owner can have a varying percentage of ownership.
For example, one party might own 30%, where the other party owns the remaining 70%. In other words, there are shares involved in tenants in common.
However, most marriages do NOT have this arrangement, and it is very likely you instead have a joint tenancy.
Severing a joint tenancy:
In a divorce, you and/or your former spouse may wish to end a joint tenancy. Common reasons for this include:
- You have decided that one of you will receive full ownership over the property
- You have decided to sell the property to a third party
The easiest way to severe a joint tenancy is if you and your former spouse come together and reach a mutual agreement. There are 3 main steps in this process:
1. Calculate the assets and liabilities obtained during the marriage.
To ensure you reach a fair and unbiased settlement that reflects your individual interests, it may be beneficial to seek legal advice from family lawyers. If this applies to you, get in touch with us via the contact form.
2. Consent orders
Next, you can ask the Court to turn your agreement into consent orders. This will formalise your agreement and make it legally enforceable. This is done by completing an Application for Consent Orders (which can be prepared by a lawyer) and filing it with the Family Court of Australia.
Providing that the Court finds the agreement to be fair and reasonable, it will become a binding order. From here, you cannot make any further claim on the property.
If needed, we can give assistance to help navigate these forms before you sign them.
3. Ending the joint tenancy
The next step involves actually terminating the joint tenancy. Regarding real estate, it is likely that you may sell your interest in the property to your former partner for a lump-sum payment, or vice versa. This involves a straight-forward property Transfer Form which can be arranged and prepared by us. The form must be completed, stamped, and lodged with the relevant property title registry.
Once the joint tenancy is successfully transferred to one of the parties, the other party loses their rights and obligations to that property. Alternatively, you may choose to sell to a third party.
What happens if you can’t agree?
If you are in dispute with your former partner (co-owner of your property), joint tenancy can still be severed unilaterally (on your own), or by court ordered sale or partition.
Unilateral severance occurs when only you (and not your former partner) transfer your interest in the property. This can be transferred:
- To a third party
- To yourself
- By declaring a trust over your interest; or
- Transferring your interest to a trustee to hold on trust for a third party or yourself.
When the tenancy is severed, the co-ownership between you and your former spouse becomes a tenancy in common, meaning you no longer have equal interest in the property as your former spouse, nor the right of survivorship (as discussed above).
Forced sale or partition:
Where a divorcing couple in a joint tenancy are in dispute and cannot make progress towards an amicable agreement, you or your former spouse may apply for the court to order that a trustee be appointed to hold the property on trust for the sale.
You can also apply for a physical partition of the land meaning that it is divided into separate portions.
Most of the time, these requests are upheld, and a court order will generally be for the sale of the property. A court will not refuse the order on the basis that one co-owner thinks it is unfair.
However, this can take months or potentially years to resolve, and so it is highly recommended that you and your co-owner attempt to negotiate and come to an agreement in the interest of saving time and money.
It is important to note that severing a joint tenancy may create conflict or estrangement between parties that could in turn make other matters of settlement more tense. If you need assistance with legal issues surrounding joint tenancy, get in touch with us via the contact form on this page.
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