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Joint Tenancy Case Study

Discussion in 'Legal Issues' started by Zii, 26th Sep, 2015.

  1. Zii

    Zii Member

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    Adelaide
    Hi All,

    A couple (we'll call them Adam and Eve, aged 40 and 38 respectively - no kids) living in South Australia own a house (PPR) as Joint Tenants, unfortunately, they no longer see eye-to-eye (putting it lightly); especially when it comes to the almighty dollar (ahhh, the joys of marriage). Eve is business-minded and wants to begin investing in property to create passive income. Adam prefers to play it safe and wants to live a simple life; ideally, he wants to work until retirement... besides, all this talk of rental yields, LVR's, and cash-cows is overwhelmingly complicated.

    Eve, using the equity from their PPR, has planned to demolish, subdivide and build two rental houses. From her feasibility study, the two properties will be positive cashflow and will generate a nice profit of $21,300/year (after expenses)!

    Now, taking Adam and Eve's political situation into consideration, how can Eve proceed with her plan if Adam is against it?

    In other words: As Joint Tenants owning a PPR in S.A., do both tenants need to approve any actions* pertaining the PPR?

    *Actions
    : Renovations, Demolitions, Subdivisions, Accessing Equity, etc.
     
  2. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

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    With a joint tenancy each person owns the same interest in the property. Each has a right to the whole property with the other joint tenants but no particular right to any share of it.

    One owner could do improvements to the property. But it would be difficult to recover the other owner's share of the expenses. But there is a right in equity to the improved value going to the person who paid for it. e.g If you paid for a granny flat and the other owner suddenly went bankrupt it would be unfair for you to lose half the property when you may have paid for 75% of the value.

    A JT cannot mortgage their 'share' of the property as there is no share. A TIC owner could - if there was a lender willing to lend.

    Subdivision is a change in legal title so all owners would need to agree.

    If there is a dispute and all owners cannot agree then one can apply to the courts to appoint a trustee who will take over ownership and sell the property.
     
  3. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

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  4. Zii

    Zii Member

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    Adelaide
    Thanks Terry_w,

    May you please expand a little more regarding the equity? Let's say Eve wanted to pull out $2,000 for professional financial services, would that require approval from the other JT?
     
  5. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

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    You can't pull equity out - only borrow money. To borrow money you need to apply for a loan. All owners need to be in the loan or guarantee so without consent it will be impossible to borrow.

    If a loan is already in place then there may be the ability to borrow without further consent - e.g redraw or a LOC. Whether you can do this or not will depend on how the account is set up - who has access.