Which ownership option is right for me?
There is an awful lot to consider when you are buying a home. Including negotiating and securing an agreement, investigating the property to make sure it is a wise investment, arranging finance, making KiwiSaver first home withdrawals, obtaining Homestart grants (if you are a first home buyer), settling and everything in between.
We will set aside family trusts or companies as ownership options, and focus on situations where you buy property in your personal name with someone else. with the other person or the other people who buy it.
This also means that your interest in the property isn’t dealt with under your Will – it passes to the surviving joint tenant or joint tenants regardless of what your Will says about what you want to happen to your property.
For example Jacinda and Bill, a couple who are first home buyers, each get a $5000 Homestart Grant and $10,000 KiwiSaver withdrawal, and contribute joint savings to make up the rest of their deposit, and take out a joint loan with the bank.
They buy the property as joint tenants, make equal payments towards the costs of the property, and remain a couple until Bill passes away at which time Jacinda becomes the sole owner of the property.
This form of ownership is very common and can be a good choice for people who contribute equally to the purchase of a property as Jacinda and Bill did, and want the survivor to get the whole of the property on their passing.
However, it shouldn’t be seen as a ‘‘default’’ option. It is important to consider the individual circumstances of your purchase and the way you want the property to be dealt with in the different circumstances that can arise moving forward.
The key characteristic of this form of ownership is that you own a defined share in the property, and this share does not automatically go to the other owners of the property if you pass away - your Will dictates what happens to your share.
Using our previous couple as an example again, Jacinda and Bill buy a property as tenants in common in equal shares, and on Jacinda’s passing her share in the property is given to her children under her Will.
Now, her children own her half share in the property and Bill still owns his half share.
This form of ownership can be a good choice in these common situations:
a. Where the people purchasing the property are making unequal contributions towards the purchase – each person’s share in the property can reflect and protect their contribution;
b. Where people who are in a relationship are purchasing the property together, to protect their respective shares in case one of them passes away, and the survivor enters into a new relationship; or
c. Where the property is being purchased by people who are not in a relationship, or for investment purposes (although first home buyers wanting to use their KiwiSaver and a Homestart Grant need to be mindful that they will not be able to do so if the property they are purchasing is an investment property that they won’t be living in).
Buying a home is an exciting and busy time, and it is important to ensure that you give some thought as to how you want to own your property.
- Hayley Willers is a property law specialist and Associate of law firm DTI Lawyers. Email hayley@dtilawyers.co.nz or phone 07 834 7712 www.dtilawyers.co.nz