Property Law: Lease, Mortgage And Application Essay

Question:

Discuss about the Property Law for Lease, Mortgage and Application.

Answer:

Property Co-ownership is a form of ownership where two or more persons share the ownership of any property. Co-ownership is a way that enables the Australian young people, in particular, to purchase houses that are available at high prices and is unaffordable for most of the people. As it is, a known fact that every person dreams of owning their own home which becomes unattainable to realize owing to the incline in the prices of the house, in particular for those who are single. While couples tend to pool their resources and incomes to be able to afford a home, it becomes very difficult for those who are singles as they rely on single source of income and one savings account[1]. This inconvenience makes them resort to co-ownership for purchasing property either with a friend or family member. Where two or more persons take an estate or interest in land on lease, mortgage, application, transfer such persons are required to hold the land or property as joint tenants or tenants in common. This clearly signifies that co-ownership is an increasing trend in Australia, especially for young peoples and those who are single. This essay discusses about the advantages and the necessity of co-ownership in Australia.

When two or more persons take a property on tenancy, they do it as either joint tenants or tenants in common. The reasons behind the Australians opting for co-ownership are two-fold. Firstly, co-ownership provides the Australians, with the affordability to purchase houses that are otherwise, unaffordable for them[2]. Further, for people who are purchasing houses for the first time, it becomes more difficult for they have to put a deposit together. The purchasers who are young and those who are single and rely upon the single income and savings source, finds it more difficult compared to those who purchase such homes by way of co-ownership. People purchasing homes in co-ownership have the option to split the deposit as both the co-owners pool together their respective savings that improves the position of the co-owners with respect to the deposit of the homes.

Secondly, there is a trend of late marriage in Australia, which implies majority of the Australians usually do not purchase a property or home of their own. Therefore, single persons may consider their friends and siblings to assist them to achieve an investment property. Another reason that leads to an incline in the co-ownership is an increase in the borrowing capacity that is, the persons sharing the ownership gets to split the deposit money which otherwise would have been paid by the single person purchasing or renting a house[3]. The advantage of pooling together the deposit of the house is that it enables the co-owners to join their savings and pay a higher deposit, which enables them to avoid the expensive mortgage insurance.

As mentioned above that, in order to purchase a property or an interest in land by co-ownership, the co-owners are said to hold such interest in land or the property as tenants either in common or as joint tenants[4]. Tenants in common are a form of tenancy where each person has a share of the property and they own the property purchase or taken on lease together. For instance A, B and C purchase a property for $90,000. A makes a contribution of $20000, B makes a contribution of $30000 and C makes a contribution of $ 40000. Here, the purchase of the property has been made by way of co-ownership and A, B and C are the co-owners of the property. The transfer shall be followed as A shall be entitled to 2/9 share; B shall be entitled to 3/9 share and C shall be entitled to 4/9 share being the tenants in common[5].

Each of the tenants has a right to deal with their part of the property, which is separate from the others, in their respective ways. This implies that each of these tenants is entitled to mortgage or sell their part of the property. In case, one of the tenant dies, his part or share of the property passes in accordance with the instructions made by such deceased person in his will, which implies that the tenant has specified the organization or person that shall be entitled to the share of the deceased person with respect to the property.

Joint tenancy, on the other hand, is a form of tenancy where the tenants of the property are entitled to equal shares of the property irrespective of the fact the number of persons hold the property as tenants[6]. On the death of one of the joint tenants, the share passes to the other joint tenants in equal share in case there is more than on tenant, irrespective of the fact whether the deceased person actually intended to transfer the share to the other tenant, as may be set out in his will.

According to section 126 (1) of the Property Law Act 1969 (WA) was applied in Pateman & Anor v Daw Koh & Anor [2007][7], which stated that there is no right of survivorship in tenancy in common unlike in joint tenancy[8]. In Joint tenancy, then rights of survivorship exists which implies that the interests of the deceased joint tenant shall pass on to the surviving tenants.

It is a fact that there are risks associated with co-ownerships, which might make it undesirable for several persons. Such risks include affordability for future homes may be affected because the co-owners are jointly responsible for the taking loans for the deposits of the house, it often become difficult to arrange for a future loan for another property. This is because; the affordability is assessed on the basis of the income of an individual. If one of the co-owners wishes to purchase a second property, the bank shall consider the first loan taken by the co-owner and he shall be solely responsible for the loan. There may be issues pertaining to the sale of the property, where one co-owner wants to sale off the property and the other owner does not, and the matter is driven to court, which is not only expensive but also stressful.

Another issue that may arise in co-ownership is the responsibility regarding the mortgage. If all the co-owners sign the loan document, every borrower is accountable individually for each other’s debts. Under such circumstances, is any one of the co-owner fails to make his/her loan payment, the bank shall consider the other co-owners liable for the failure to make the loan payments[9]. There is issues related to joint tenancy as well which arises if there is a default in the categorizing of an interest in land as a joint tenant due to the existence of the ‘four unites’. Such default may result in change in status of the joint tenants as tenants in common.

Nevertheless, considering the big picture, majority of the Australians merely dream of having their own house but are incapable of realizing their dream, given the high prices of the houses or properties. With the help of co-ownership, they get a chance to realize this dream of owning a house or property[10]. As discussed above, co-ownership involves two or more persons owning a property, which reduces the load of a single purchaser to pay the deposit amount. The purchasers may co-own the property either as joint tenants or as tenants in common. It enhances the borrowing capacity for the borrowers, which involves splitting of the deposit. It is an advantage for young persons, singles and those who have low earning incomes. These individuals get the opportunity to afford properties that they could not have been able to purchase property.

From the above discussion, it can be inferred that it is equally beneficial for those who have high-income capacity as they become entitled to have great tax benefits on a property and enables them to reduce the taxable income or become entitled to receive a greater tax refund per annum[11]. The tenants in common do not possess the right of survivorship but a tenant in common is entitled to hold an undivided share in the property owned by them and is entitled to possession. Unlike joint tenancy, the tenants in common do not require to have unity of interest, hence they are entitled to hold unequal shares. Each of the joint tenants has an equal right to possession of each of the part that is held by the purchasers and to the whole of the purchased property but such the tenant shall not be entitled to any right to any part of the property.

It is sufficient that co-ownership exists in the form of tenancy in common in the country as it enables individuals to purchase property or an interest in land without having to pay for deposit alone and are entitled to own the property to the extent of the capital deposited by them. It also entitles them to sell off or mortgage their part of the property, that is separate form te remaining tenants.

Reference list

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Blandy, Sarah. 14th Australasian Property Law Teachers’ Conference 2017 Beyond Sole Ownership Curtin Law School, Curtin University, Perth, Western Australia 26–29 September 2017 Draft Conference Programme. Diss. Faculty of Law, University of Southampton, 2017.

Briggs, Kristie. "Co-owner relationships conducive to high quality joint patents." Research Policy 44.8 (2015): 1566-1573.

Duncan, William D., et al. "Property law review issues paper 4–Mortgages, Co-ownership, Encroachment and Mistake." (2016).

Hulse, Kath, and Terry Burke. "Private rental housing in Australia: Political inertia and market change." Housing in 21st-century Australia: People, practices and policies (2016): 139-152.

Kraatz, Judy A., et al. "Rethinking social housing: efficient, effective and equitable." Sustainable Built Environment National Research Centre Research Report 75 (2015).

Palmer, Jane, et al. "Green tenants: practicing a sustainability ethics for the rental housing sector." Local Environment 20.8 (2015): 923-939.

Pateman & Anor v Daw Koh & Anor [2007] WASCA 85

Property Law Act 1969 (WA) section 126 (1)

Rigsby, Bruce. "A survey of property theory and tenure types." Sydney University Press, 2014.

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Robertson, Courtney. "Casenote: State of Western Australia v Alexander Brown and Ors [2014] HCA 8." Indigenous Law Bulletin8.12 (2014): 24.

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