Tenancy in Common: A Distinct Form of Co-ownership
When a property is owned by tenants in common, each owner holds a distinct, separate share of the property. This share can be equal (e.g., 50/50) or unequal (e.g., 70/30).
The most crucial difference from a joint tenancy is that there is no right of survivorship.
This means that when a tenant in common dies, their share in the property does not automatically transfer to the surviving owner(s). Instead, the deceased owner’s share becomes part of their estate.
What Happens to the Deceased’s Share?
The deceased’s share of the property is dealt with according to the instructions in their Will. If there is no Will, the share is distributed according to the rules of intestacy, as outlined in the Administration Act 1969.
This means the beneficiary of the deceased’s share could be their spouse, children, another family member, or anyone else they have named in their will. The surviving tenant in common has no automatic right to inherit this share.
The process of transferring the deceased’s share is managed by the executor of the Will or the administrator of the estate. This legal process is known as probate (if there is a Will) or letters of administration (if there is no Will) and is granted by the High Court.
Informing the Bank: A Shared Responsibility
Just as with a joint tenancy, it is essential to inform the bank when a tenant in common passes away, especially if there is a mortgage on the property. However, the implications are more complex.
- Mortgage Liability: All tenants in common who signed the mortgage documents are typically “jointly and severally liable” for the entire debt. This means the bank can seek repayment for the full amount from any of the living owners or from the deceased’s estate. The death of one owner does not erase their portion of the debt.
- Estate’s Responsibility: The deceased’s estate is now responsible for the deceased’s portion of the mortgage repayments until the property share is either sold or formally transferred to a beneficiary. The executor of the estate must make arrangements to cover these payments.
- Communication is Key: The surviving tenants in common must communicate with the executor of the deceased’s estate. Together, they need to liaise with the bank to establish a plan for the mortgage. This could involve:
- The estate continuing to make payments for the deceased’s share.
- The beneficiaries of the share taking over the mortgage obligations once the title is transferred to them (subject to the bank’s approval).
- The surviving owners and the estate agreeing to sell the entire property to pay off the mortgage.
- One or more of the surviving owners buying out the deceased’s share from the estate, which would require new mortgage financing.
The Property Title Transfer Process
To update the property title, the executor of the estate must apply to Land Information New Zealand (LINZ) for a “transmission” of the property share. This officially transfers the deceased’s share into the name of the executor, who then holds it on behalf of the estate.
Following this, the executor can then legally transfer the share to the beneficiaries as stipulated in the will or sell the share. This final step will also be registered with LINZ to reflect the new ownership structure. This process requires legal assistance from a lawyer or conveyancer.
Summary: Joint Tenancy vs. Tenancy in Common
| Feature | Joint Tenancy | Tenancy in Common |
| Ownership | Owners have an undivided, equal interest in the whole property. | Owners hold distinct, separate shares (can be equal or unequal). |
| Survivorship | Right of Survivorship applies. The deceased’s share automatically passes to the surviving owner(s). | No Right of Survivorship. The deceased’s share passes to their estate (via their Will or intestacy rules). |
| Title Transfer | Survivor applies for a “transmission by survivorship” with LINZ. A relatively straightforward process. | Executor of the estate applies for probate/letters of administration, then a “transmission” to transfer the share to the estate, and then to the beneficiaries. A more complex, multi-step process. |
| Informing the Bank | Survivor informs the bank and becomes solely responsible for the mortgage. | Surviving owner(s) and the executor of the deceased’s estate must both engage with the bank. The estate remains liable for the deceased’s share of the debt. |
The death of a tenant in common sets in motion a more complex legal and financial process than with a joint tenancy. It involves the deceased’s estate, their beneficiaries, and often requires significant communication and agreement between the surviving owners and the estate’s executor to manage the mortgage and the future of the property. Seeking prompt legal advice is crucial for all parties involved.
We guarantee that you will be legally protected and ensure that the legal transfer is completed correctly.
If you wish to find out the process for a quick transmission (tenancy in common) process, you can click the button below.
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