Hi there. Below is some background information and specific responses to your questions.

Types of co-ownership

There are two types of co-ownership under Australian property law. The first is known as ‘joint tenancy’, which gives all joint tenants the right to possess all of the property. There can be multiple joint tenants. Each joint tenant’s interest must have been created at the same time from the same event (e.g. the purchase of a house), so it is not possible for a new person to become a joint tenant later on. If a new person wants to become a co-owner of the property, they must join as a tenant in common (discussed next). Joint tenancy also involves the right of survivorship. This means that, if one joint tenant dies, their interest will automatically pass to the remaining joint tenant(s), regardless of what is specified in the deceased tenant’s will.

The second and more common type of co-ownership is known as ‘tenants in common’. This allows multiple parties to hold equal or unequal shares in the property and to deal with them as they wish. For example, a person can sell or transfer their share of the property to a third party who will become a new tenant in common. The right of survivorship does not apply, so a deceased’s owner’s interest in the property can be dealt with according to their will.

With this background information, the answers to your questions are as follows:

1. It is possible under NSW law to have more than two owners of a property holding their interest as joint tenants, but all of the owners must have purchased the property in the same transaction.
2. If a third party later purchases an interest in an existing property owned by two people as joint tenants, the third person will acquire their interest as a tenant in common. The third person cannot be a joint tenant because their purchase transaction is a separate, later event to the original creation of the joint tenancy. The two pre-existing owners will remain joint tenants.
3. If one of the two joint tenants is replaced with an incoming owner, the joint tenancy will be destroyed. Each owner will hold their interest as tenants in common.

Duty and taxes

In NSW, transfer of land or business duty (formerly known as stamp duty) is payable on the sale or transfer of land. The purchaser or transferee is liable to pay the duty within three months of signing the sale contract or transfer document or, if there is no document, after the sale or transfer occurs. Duty is calculated on the total dutiable value of the property. In your situation, duty would be payable if a third person purchased or otherwise acquired an interest in the property, regardless of the co-ownership arrangement. See the NSW Office of State Revenue website for more information (www.osr.nsw.gov.au).

Capital gains tax (CGT) is payable when a person makes a capital gain from the sale of an asset. If one of the existing owners sold their interest in the property to a third party, they may be liable to pay CGT. However, a CGT exemption applies if the property is the main residence of the seller. See the Australian Taxation Office website for more information on whether CGT is payable (www.ato.gov.au).

Suggested way forward

Your questions deal with technical legal concepts of property ownership. Depending on your plans for the property, you may want to speak to a lawyer for a properly assessment of your legal rights and the best course of action. By pressing the “Consult a Lawyer” button, LawAdvisor can help you search for experienced lawyers and obtain fee proposals for their services. Costs for legal advice and representation will vary between providers based on experience and the scope of services.