Key Takeaways
- ‘Shared ownership’ is the umbrella term for any arrangement where two or more people own the same property.
- The most common legal structures are joint tenancy, tenancy in common, and informal co‑ownership agreements.
- Each structure has different rules for inheritance, survivorship, and how you can sell your share.
- Setting up shared ownership usually requires a solicitor, a clear written agreement, and agreement from any lender.
- Pros include lower entry cost and shared upkeep; cons include potential disagreements and complications when selling.
What "Sharing Ownership" Means
When people talk about shared ownership is a arrangement where two or more individuals hold legal title to the same property together, they’re describing a form of co‑ownership that lets each party own a slice of the asset. This concept is often referred to as shared ownership in everyday language.
In practice, shared ownership can appear in many guises: a family buying a house together, friends pooling money for a holiday home, or investors forming a partnership to purchase a rental property. The key idea is that each person’s name appears on the title, and each holds a percentage of the equity.
Common Legal Forms of Shared Ownership
Legal systems draw clear lines between the ways you can own property jointly. Below are the three most frequently used structures in NewZealand and other common‑law jurisdictions.
Co‑ownership is a broad term that covers any situation where two or more people own a property together. It can be further split into joint tenancy and tenancy in common.
Joint tenancy is a form of co‑ownership where each owner has an equal share and the right of survivorship. If one owner dies, their share automatically passes to the surviving owners, bypassing the will.
Tenancy in common allows owners to hold unequal shares and does not include survivorship. When a co‑owner dies, their share is inherited according to their will or the intestacy rules.
While the law treats joint tenancy and tenancy in common as distinct, many people simply refer to either as “co‑ownership” in casual conversation.
Comparison of the Main Types
| Feature | Joint Tenancy | Tenancy in Common | Informal Co‑ownership |
|---|---|---|---|
| Ownership shares | Equal (½, ¼, etc.) | Can be equal or unequal | Usually based on contribution, but not legally fixed |
| Right of survivorship | Yes - share passes automatically | No - share is inherited | Depends on any written agreement |
| Transfer of interest | Requires consent of all owners; otherwise creates tenancy in common | Can sell or gift your share without affecting others | Typically needs unanimous consent |
| Financing considerations | Lenders often prefer equal ownership | More flexible, but lenders may require guarantors | Often financed individually, which can complicate mortgage terms |
How to Set Up a Shared Ownership Arrangement
- Clarify each party’s goals. Are you looking for an investment, a family home, or a vacation getaway? Your purpose will dictate the most suitable legal structure.
- Choose the ownership type that matches your goals - joint tenancy for equal partners who want survivorship, tenancy in common for investors with different share sizes, or a bespoke co‑ownership agreement for friends.
- Draft a written agreement. This should cover contributions, how expenses are split, decision‑making processes, and exit strategies. Even if you opt for joint tenancy, a supplemental agreement can prevent misunderstandings.
- Secure financing. Approach a lender early and disclose that the property will have multiple owners. Many banks require a mortgage that lists all owners as borrowers.
- Engage a solicitor. A property‑law solicitor will ensure the title reflects the chosen structure, register the deed, and lodge any necessary forms with Land Information NewZealand (LINZ).
- Finally, record the arrangement at the Land Registry. This makes the ownership type public and protects everyone’s rights.
Pros and Cons of Shared Ownership
Understanding the trade‑offs helps you decide if sharing ownership is right for you.
Advantages
- Lower entry cost: By pooling money, each participant can afford a larger or better‑located property than they could alone.
- Shared responsibilities: Maintenance, council rates, and mortgage payments are split, reducing the burden on any single owner.
- Flexibility for investors: Tenancy in common lets investors buy different percentages, aligning with their capital.
- Estate planning benefits (joint tenancy): The right of survivorship can simplify inheritance for families.
Disadvantages
- Potential conflict: Disagreements over upgrades, rental decisions, or selling timelines can stall progress.
- Credit impact: If one co‑owner defaults on their share of the mortgage, the others’ credit can suffer.
- Difficulty selling: All owners must agree to a sale, or a single owner may need to force a partition action through the courts.
- Tax considerations: Rental income must be split, and capital gains tax can become complex when shares differ.
Frequently Asked Questions
Can I change from joint tenancy to tenancy in common later?
Yes. By transferring the title to reflect unequal shares, the survivorship right is removed, effectively converting the arrangement to tenancy in common. A solicitor must lodge the change with the land registry.
Do I need a lawyer if we just want an informal co‑ownership?
While not legally required, a solicitor can draft a simple co‑ownership agreement that saves you headaches. Without written terms, disputes are settled in court under general property law, which can be costly.
How does a mortgage work for multiple owners?
All owners are usually listed as borrowers, meaning each is jointly and severally liable for the full loan. Some lenders allow split mortgages where each party is only responsible for their share, but this is less common.
What happens if one co‑owner wants to sell their share?
In a tenancy in common, the owner can sell or transfer their share without needing approval from the others, though most agreements include a right of first refusal clause. In joint tenancy, selling a share typically breaks the joint tenancy and converts it to tenancy in common for all parties.
Are there tax advantages to joint tenancy?
Joint tenancy itself does not give tax breaks, but each owner can claim their proportion of mortgage interest and expenses on their own tax return. However, capital gains tax on the eventual sale is still split according to ownership shares.
Whether you’re buying a family home, a weekend cabin, or an investment property, knowing the correct term and legal structure saves you money and stress. By picking the right form-joint tenancy, tenancy in common, or a bespoke co‑ownership contract-you can protect your interests and enjoy the benefits of shared ownership.
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