NSW Tenants in Common with Son - Percentages of Ownership under Property Law?

[Angela Zacharek]

Percentages: value of the land (and buildings?) or area of the land.

I want to create a Tenants in Common with my son. I believe Tenants in Common works with percentages of ownership under property law, e.g. 50%, 30%. I would rather have the agreement delineating an area of land that is a natural separate section, being divided by a proposed road easement.

It is difficult to work out percentages based on value because I am building a house on the land. If I say 50% of the land, being the area of the separate section, may this be taken to mean 50% of the value? Are buildings or improvements counted in working out a percentage? If so, should I wait until the house is built, a valuation done and a new percentage worked out that reflects the percentage value of the separate section of land?

The value of the separate section of the land is lower than the section that I want for myself as it is prone to flooding. I estimate the value of the separate section that is 50% in area is about 30% in value of the land.

 

[James D. Ford - Solicitor]

Hi Angela

I assume you are the existing owner of the property. Please confirm.

If so, have you approached council regarding the chances of obtaining approval to subdivide the property?

If this is not possible, then there is no other way to split the property based on area... the lower portion of land that is prone to flooding (without a subdivision) would not be able to be sold separately.

Is this a gift to your son, or is your son contributing funds towards his share of the property?

Any % held as tenants in common are of the entire property (including improvements).

To improve the accuracy of the % split, unless there is some other reason that requires it, it would be better to wait until the house is built, and you determine the new valuation for the property.

One other consideration is whether your son is eligible for a first home owner's grant? and whether providing your son with a share in your property will cause your son to lose his eligibility for any such scheme, or whether he would qualify in taking up a share in your property...

Further, before any transfer takes place, it is extremely important to understand especially in a family situation, who is going to pay for what, on an ongoing basis? This is generally done via a property co-ownership agreement, which sets out ongoing contributions, property maintenance, and what will occur if and when one person wants to sell, or mortgage the property, or buy the other person out of their share, etc. This can avoid arguments down the track.

Kind regards

 

[Angela Zacharek]

Thanks for reply. I am the owner, with a bank loan for the land. I approached the Council and was advised that the property could not be subdivided. My son is contributing some money and work in building the house, it is not a gift. Its very good to get this information, that the percentage solely relates to property value including improvements, and as such, it would be better to wait until the house is built then get a valuation to work out the correct percentage.

It is also very good to know that a Property Co-Owner Agreement can take care of 'running' agreements. I will also follow the first home owner scheme for my son.

Is there any difference in costs e.g. stamp duty, legal costs etc, between Tenants in Common and Joint Tenancy?

I appreciate your thoughts.

Thanks

 

[James D. Ford - Solicitor]

Hi Angela, be careful regarding the first home owner scheme... look into it in detail... if you son is only a part owner, or is not building his own house... he may not qualify at all or only partially qualify for the full grant/stamp duty savings he would otherwise be entitled to... especially if he is only purchasing 30% of the property... and he applies after the house is built...

Everything you need to know about the NSW first-home buyer $15,000 grant scheme

First Home Owner Grant | Office of State Revenue

There is no difference in costs between Tenants is Common and Joint Tenancy... do you understand the difference? and what it means?

Kind regards

 

[Angela Zacharek]

Thanks James. I'm believing that
1. Joint Tenants are equal partners, and that property automatically goes to the surviving party if one dies. There are no percentages and no rights to will one's share to beneficiary/ies.
2. Tenants in Common own their share in their own right. The property is not divided along lines of area, but the percentage of value of each share can be stipulated. A Property Co-Owner Agreement can be drawn up to specify who will take responsibility for the running costs of the property, to cover a co-owner's wish to sell their share/interest, to specify use of the property.
Is this right?
cheers

 

[James D. Ford - Solicitor]

Hi, what you have described is partially correct... you need to be aware that a "Joint Tenancy" can be unilaterally severed... by one of the Joint Tenants... and become a Tenants in Common situation... with 50/50% ownership at anytime. A property co-ownership agreement is recommended in all situations, so that responsibilities are clarified in advance, and if the tenancy changes to Tenants in Common, what would then happen is already agreed as well.

http://www.austlii.edu.au/au/legis/nsw/consol_act/rpa1900178/s97.html

Kind regards

 

[James D. Ford - Solicitor]

if Joint Tenants is used, you also need to be aware that Bankruptcy operates to sever a joint tenancy, and change it to a 50%/50% Tenants in Common situation.

 

[smart]

I had bought my first home property in the suburb Hoppers crossing in Victoria in 2015 March. The property was originally built in 1984 and I had purchased it for 340000.

I am an Australian citizen but because I am an immigrant was unaware of FHOG.

Can I still lodge an application for FHOG of 10000 as I am facing financial hardships.