How to Sell Property as Tenants in Common
Tenancy in common is one of the main types of property co-ownership. Find out what rights a tenant in common has when selling property.
What is a tenant in common?
A tenant in common has distinct rights when selling co-owned property.
Tenancy in common is one of two main types of co-ownership. Basically, each tenant in common owns a fixed undivided share of the property. For example, someone could own 50% of the property. When someone co-owns property as a tenant in common their share of the property does not grow or shrink over time unless they take specific actions to that end.
Furthermore, tenants in common may own unequal shares of the property. While co-owners are free to nominally agree on any arrangement to divide the property, if a dispute arises courts may overrule the agreement and determine the division of ownership according to the financial contributions each co-owner made to the value of the property. Each co-owner has the right to possess and enjoy the whole of the property no matter the amount of their share in the property. Moreover, each co-owner is able to leave their share of the property to others in their will.
Comparing tenancy in common with the other form of co-ownership, joint tenancy, can further highlight the characteristics of the tenancy in common relationship.
Unlike tenants in common, joint tenants each own the whole of the property. However, while there are other joint tenants, they are said to each own an equal potential share of the property. Furthermore, they must each have the same interest derived from the same legal instrument at the same time.
The share of a joint tenant can grow over time. This is due to the right of survivorship. To explain, the right of survivorship ensures that joint tenants cannot leave their share of the property to others in a will. Instead, if a joint tenant passes away, then their share of the property automatically goes to the surviving joint tenants. If there are multiple surviving joint tenants, then the share is split among the surviving join tenants evenly in keeping with the rules of joint tenancy. On the other hand, if there is only one surviving joint tenant the whole of the property co-owned under the joint tenancy goes to the sole survivor.
A joint tenant can sell their potential share of the property. In doing so, they sever the joint tenancy. As a result the new owner of the sold share owns that share as a tenant in common. Meanwhile, the remaining joint tenants still own the other portion of the property in a joint tenancy.
What are your rights for selling property as a tenant in common?
Likewise, any tenant in common can sell their fixed share of the property. The new owner of the share in the property will also own it as a tenant in common. However, it should be noted that co-owner can sell their share to another co-owner of the same property. If there were only two co-owners, the remaining co-owner will become the sole owner after the sale. All co-owners may also coordinate a simultaneous sale of each of their shares to a third party, which would end the co-ownership. As a result of the sale, the third party becomes the sole owner.
Court ordered selling
Where the co-ownership has broken down, the court may end the co-ownership by ordering a sale. The Conveyancing Act 1919 (NSW) empowers any co-owner to apply to the court for this. Generally, courts rarely refuse such an application. In this case, each co-owner is entitled to a share of the proceeds of the sale. The court determines the rightful share of each co-owner according to their proportion of interest in the property as a tenant in common. The court can adjust the proportion according to any rights each co-owner has against each other. These may include:
- occupation fees owed by other co-owners arising by way of agreement or unlawful exclusion
- reimbursements for contributions made to improve the value of the property
- claims against any rent or profit arising from the property collected by another co-owner
To make sure you protect your rights as a co-owner, it is important to consult a property lawyer.
Alex is a Legal Tech Intern at Lawpath working as a part of the content team. He is currently studying a Juris Doctor at the University of Technology Sydney. He is interested in how design and technology can help improve the experiences of legal practitioners and their clients.