Joint Tenants

When parties own property as joint tenants, this means that:

• all joint tenants have equal ownership and interest in the property; and
• a right of survivorship exists.

Commonly, joint tenants are husband and wife or couples in long-term relationships and unless you specify otherwise when you are purchasing the property, the law assumes that your purchase is a joint tenancy.

The right of survivorship means that if one of the joint tenants dies, the property will automatically pass to the surviving joint tenant. This happens regardless of any contrary intentions in the will of the deceased.

Where two or more people are joint owners in a rental property, the net rental loss or profit must be shared in line with their legal interest in the property. Therefore, as joint tenants they must each include an equal share of the total income and expenses in their tax returns. (Exception: Interest on money borrowed by only one of the joint tenants which is exclusively used to acquire that person’s interest in the rental property).

Any agreement that they might draw up to divide the income and expenses other than equally between them has no effect for income tax purposes. Therefore, even if one taxpayer pays most of the bills associated with the rental property, they would not be able to claim more of the rental property deductions than the other owner.

Tenants in Common

When parties own property as tenants in common, it means that two or more people co-own a property in defined shares that they can dispose of as they wish. The shares owned by each tenant in common can be equal or unequal. For example, one person may own 99% of the shares with the other owning 1%.

Tenants in common must divide the income and expenses of the property in line with their legal interest in the property. (Exception: Interest on money borrowed by only one of the joint tenants which is exclusively used to acquire that person’s interest in the rental property).

A tenant in common can sell their shares in the property or give them away in a will. This means that there is no right of survivorship.

If it is not known whether the taxpayer holds a legal interest as a ‘joint tenant’ or a ‘tenants in common’, read the title deed for the rental property.