JOHN and Tony are good friends who have known each other for many years.

They are both looking to buy an investment property and decide to pool their resources and purchase a property together.

They find a large rural property which includes two separate dwellings.

They each contribute to the purchase price and the payment of stamp duty.

John decides to use the larger dwelling for long-term rental accommodation and Tony uses the other dwelling for short-term tourist accommodation.

Several years pass until it is discovered that John’s tenants have vacated with a substantial arrears in rent.

John demands that the outstanding rent is paid and in response, the tenants claim that the property was not fit for occupation due to water leaks and electrical faults.

The tenants say that they informed Tony of the issues but he said, “It’s not my problem.”

After an unpleasant confrontation with Tony, John seeks legal advice.

It is revealed that the property is owned by John and Tony as joint tenants.

John is horrified when he learns that if he passed-away before Tony, Tony would receive the whole property by way of survivorship.

John immediately instructs his solicitor to “sever” the joint tenancy, creating a 50/50 ownership as “tenants in common”.

John is also not happy to hear that there is a question as to the validity of the lease that he entered into with his tenants because Tony, as the other owner of the property, did not sign the lease.

There is also a question as to whether John should have shared the rental proceeds with Tony. As John may also face a cross-claim by the tenants, he does not pursue this further.

John is then informed that if he wants to sell the property, he cannot do so without Tony signing the contract, or without an order of the Court, appointing a trustee to take carriage of the sale.

When buying property with another party, seek legal advice and consider entering into a written agreement regarding the use of the property and its realisation.

If YOU would like a particular issue addressed, please email me at manny@tblaw.net.au or call me on (02) 66 487 487.

 

By Manny WOOD, Solicitor