All Topics / The Treasure Chest / Setting Up Tenants in Common Arrangement

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  • Profile photo of hwd007hwd007
    Member
    @hwd007
    Join Date: 2002
    Post Count: 247
    July 31, 2003 - 5:43 am

    I have found a property but it’s too expensive. I don’t have the equity to buy this property on my own, but I was thinking of trying to buy it with my nephew. The asset share would be 2/3 me and 1/3 him. Now questions

    1. how easily can this be set-up ? I’m thinking a Tenants in Common arrangement due to the legal interest not being equally dividied.

    2. Who sets it up ? Solicitors ? Accountants ?

    3. Getting the bank loan. How do the banks look at this ? who keeps the title if we use different banks ?

    Thanks

    Profile photo of DramDram
    Member
    @dram
    Join Date: 2003
    Post Count: 82
    July 31, 2003 - 6:04 am

    As I understand it, Joint Tennants = 50/50 split regardless of who pays the loan/expenses. So if you were to pay 2/3 costs you would only be entitled to claim 50% of borrowing expenses/interest and so on and 50% of the income.

    A better arrangement for you may be ‘Tennants-in-common’ where you can specify who owns what. So you on and pay for 2/3 of the property and you nephew the other 1/3. This is also legally binding, in that if you were to die ([:(]) your 2/3 share stays with your estate. With Joint Tennants, your share you automatically pass to your nephew.

    I believe a solicitor would be required to set up a Tennants-in-common arrangement. I’m not sure about the banks/loans….Terry or Stuart might be able to shed some light here.

    Hope this helps.

    Profile photo of ARWARW
    Participant
    @arw
    Join Date: 2003
    Post Count: 21
    July 31, 2003 - 6:30 am

    The ownership structure is generally just indicated on the Transfer of Land when you buy it – there are two structures:

    Joint tenants – which means you own it jointly in equal shares and on the death of one party the survivor will be the sole owner; and

    Tenants in common – where you indicate the percentage owned by each person (i.e. 1/2, 1/3 etc etc) and upon the death of one party their interest is transferred in accordance with their wishes.

    If you’re using the property as security for the loan, then I don’t think it would be possible to borrow seperately – both owners have to sign any mortgage document (and therefore the loan contract and/or guarantee depending on how you set it up!!).

    Mmmm, having said that….I wonder if you could both have individual loans and each go guarantor for eachother’s loan and that might work…dunno if a bank would like that setup!?!?!

    If you set up another legal entity using a trust and/or company, there would probably be a way around it, but a bit more complex and costly and would be something a solicitor and/or good accountant would be able to advise you on.

    Mmm, just rambling…not sure if any of that helps!!!

    Cheers.

    Profile photo of hwd007hwd007
    Member
    @hwd007
    Join Date: 2002
    Post Count: 247
    July 31, 2003 - 6:40 am

    thanks Dram. I’ve fixed that post to Tenants in Common Thanks for the advice peoples

    Profile photo of TerrywTerryw
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    @terryw
    Join Date: 2001
    Post Count: 16,213
    July 31, 2003 - 6:47 am

    Hi I think Dram is correct.

    In NSW you just state on the fron page of the contract where you want tenants in common (with % sahre) or joint tenants.

    Loans will have to be joint at the same bank. Both parties income and expenses etc will be taken into account

    Terryw
    [email protected]

    Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
    http://www.Structuring.com.au
    Email Me

    Lawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au

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