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What is Tenants in Common in Divorce Settlements

Tenants In Common Divorce | Justice Family Lawyers

Divorce invariably brings a series of complexities, not least property division.

This division demands careful consideration when the shared property falls under the ‘tenants in common’ framework.

Understanding the nuances of “tenants in common” in the context of a divorce can significantly influence both parties’ financial and legal standing. 

This guide delves into the key facets of such property ownership during divorce, offering clarity to those facing this challenging intersection of property law and marital dissolution in Australia.

What Is Tenants-in-Common in the Context of Australian Property Law?

Tenants in common is a form of property ownership where two or more individuals own distinct property shares.

Unlike a joint tenancy where each owner has an undivided interest, in a tenants-in-common setup, each owner’s share can be different, allowing flexibility in ownership proportions. 

How Do Tenants-in-Common Differ from Joint Tenants?

AspectTenants-in-CommonJoint Tenants
Rights of SurvivorshipDeceased’s share passed according to their will or intestacy rules if no will exists.If one party passes away, their share automatically transfers to the surviving owner(s).
Tax Implications in AustraliaCan have profound tax implications, especially for capital gains tax. Generally less complex, but still subject to certain tax implications, such as stamp duty.
Influence during Property Settlement in DivorceCan significantly influence decisions, as each party owns a specific share. Typically less complex, as the property is viewed as a single asset for both parties.

How is Property Settlement Done in Tenants in Common Divorce?

In a divorce, the way property is divided depends on various factors, including the form of ownership.

When considering tenants in common, each party’s share becomes crucial. A property settlement lawyer can offer guidance on how to approach this best.

Unlike joint tenancy, where property division can be straightforward, the division of property held as tenants in common hinges on each party’s share.

For instance, if one spouse owns 60% and the other 40%, this must be factored into the settlement.

However, the situation can become complex, especially if one party is accused of hiding assets during divorce.

What Are My Rights If My Ex-Spouse Refuses to Sell the Property Owned as Tenants in Common?

For residents of NSW, it’s essential to comprehend the tenants in common rights and liabilities.

If an agreement can’t be reached, court intervention might become necessary.

The court may end the co-ownership by ordering a sale. The Family Law Act or the Conveyancing Act 1919 empowers any co-owner to apply to the court for this.

Generally, courts rarely refuse such an application.

Also read: Selling Property Before Divorce Settlement Australia

Can I Buy Out My Ex-Spouse’s Share in Our Tenants in Common Property?

Yes, buying out your ex-spouse’s share is a viable option.

Also read: Can I Change Locks on My Husband? Australian Family Law Insight

Does a Binding Financial Agreement (BFA) Influence How Tenants in Common Property Are Dealt With During a Divorce?

A Binding Financial Agreement (BFA), often termed a prenuptial agreement, is a contract between partners outlining asset division and financial duties if the relationship ends.

A BFA’s provisions can be decisive for properties held as tenants in common during divorce.

Most BFA’s have a clause that say something like:

“If a property is held as tenants in common, then that is evidence as to how the parties intended to split the asset upon separation.”

While BFAs are binding, they’re not infallible. Validity requires independent legal advice for both parties before signing and the absence of coercion.

BFAs can be challenged if created under duress, lacking full asset disclosure, or if significant unforeseen changes, like the birth of a child, arise.

In disputes, courts prioritise fairness and current circumstances.

Can a Will or Estate Plan Interfere with the Division of Tenants in Common Property During a Divorce?

Yes, especially when considering what happens when one of the tenants in common dies. In tenants in a joint arrangement, the deceased’s share gets passed according to their will.

If a divorce isn’t finalised and one party passes away, the will dictates the division, which might supersede informal arrangements or discussions.

For NSW residents, changing ownership forms, like changing from joint tenants to tenants in common, can have implications for estate planning.

Can Tenants in Common Have Separate Mortgages?

Yes, tenants in common can have separate mortgages in Australia. However, while it’s technically possible, it’s not very common. Most lenders prefer to issue a single joint mortgage to all tenants in common on the property title.

Here are some key points about having separate mortgages as tenants in common:

  1. Individual Mortgages: Each tenant in common can take out a mortgage on their individual share of the property. This means that they are solely responsible for their mortgage, separate from any obligations of the other owners.
  2. Lender Agreement: Lenders must agree to this arrangement, as they will only have a claim against the portion of the property corresponding to the borrower’s share. This could potentially make it more complicated or challenging to find a lender willing to offer such a mortgage.
  3. Default Risks: If one tenant defaults on their mortgage, the consequences typically only affect their share of the property. However, it could lead to practical difficulties, such as the need to sell the property if the lender decides to exercise their rights over the defaulting tenant’s share.
  4. Property Sale: Selling the property or refinancing can be more complicated with separate mortgages, as it generally requires coordination between all parties and their respective lenders.

This flexibility can be beneficial, but it also requires careful consideration and planning to ensure that all legal aspects are appropriately managed.

Piecing it All Together

As couples traverse the challenging terrains of divorce and property division, they must remain informed and prepared.

Understanding the intricacies of tenants in common ownership, especially within the Australian context, can make the process smoother.

For further details on family law and property settlements, explore the Family Court of Australia and Federal Circuit Court of Australia’s overview.

Knowledge is power, and in matters as significant as divorce, it’s the key to fair resolution.

Facing Uncertainties about Tenants in Common Divorce under Australian Law?

Ensure your rights are protected and your decisions informed. Reach out to Justice Family Lawyers, experts in the intricacies of property division and divorce. Your peace of mind starts with expert legal guidance. Contact us today.

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