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How do you own your property?
One of the important questions I regularly ask clients when they are purchasing their property is how they want to own their property joint tenants or tenants in common. Then that glazed look comes over their faces and I know instantly they are unfamiliar with those phrases. Usually we have a quick tutorial in Property 101 and ownership types and what it means on death and whether they have children to previous relationships.
What’s all the fuss about then? Well it really does matter how you own your biggest asset – your home. If you hold the property as joint tenants, you cannot will your share and the survivor of the owners gets the property outright. For those with children together of that relationship they are likely to want joint tenants. On death it’s a simple transmission of the property title to the surviving party – easy!
Not so easy when the partners or spouses have children from previous relationships. They have different obligations to their own children that the other partner or spouse do not. They are likely to want to ensure their share of the property goes to their children – fair enough. In that situation, we recommend they hold the property as tenants in common. Here’s the catch – they have to update their wills to allow the surviving partner or spouse to live in the property either for a period or time or for their lifetime. Otherwise, the Executors of the deceased partner or spouse can take steps to sell the property to meet the obligations to the beneficiaries of the deceased party. It can really complicate matters and create more anxiety for the surviving party.
Tenants in common can also be a good ownership option when you are getting older and have no family trust. If one dies and the surviving party needed or might need residential care then, any asset assessment would only be on the surviving party’s share, not the estate.
Talk to the team at Law4You about the options when you are next buying your property and take the opportunity to update your wills.
Tenants should not enter into commercial leases lightly. When most tenants take the form of a company structure, the Landlord usually requires personal guarantees from the directors and shareholders. What are you personally guaranteeing? Predominantly, the guarantors will guarantee the payment of the rental and OPEX (operating expenses, aka outgoings eg rates, insurance etc) up to the end of the term of the lease if the Tenant defaults and can’t pay. This is an important point not to be overlooked. If the lease is assigned during the term of the Lease to another Tenant who subsequently defaults and doesn’t pay the rent the Landlord will look to the Guarantors for payment.
The guarantee also extends to the covenants implicit in the lease eg: repair and maintenance provisions.
How can the Guarantor mitigate their obligations?
- At the negotiation stage of the lease the tenants can negotiate so that the obligations of the guarantee terminate after a period, for instance, 1 or 2 years. The Landlord might be more amenable to this idea if the release is on the proviso that the tenant has complied with the obligations of the lease; or
- The guarantee could terminate on assignment of the lease; or
- The Tenant might try to assign close to the expiry of the term; or
- Another option may be to limit the amount the Guarantor is obligated for ie: a fixed sum.
There are options that can be explored in negotiating a new lease. Usually its preferable to enter into an Agreement to Lease to flush out any issues before being committed to the actual Lease itself.
Before you leap, talk to the team at Law4You to discuss your options.
Vendors conditions on settlement
You’ve gone through the selling process, had the purchaser on the ‘hook’, the contract is finally unconditional and now you’re gearing yourself up for shifting and settlement day.
Your focus is on the shift, cancelling utilities and looking forward to the next house. But wait, take a moment to pause and consider your obligations as a Vendor – what are they?
Did you know:
- It is a condition of settlement to provide all keys and remotes to all lockable doors and windows. Failure to do so, causing the purchaser to obtain locksmiths can cause retentions on settlement day.
- Vendors warranties in respect of chattels are now quite stringent. The obligation is for all chattels and any equipment or systems that provide services to the property eg: heating, air-conditioning, or the like, are to be in reasonable working order on settlement. That means if your heat pump suddenly stops providing heat and maybe too old to fix or get parts for, the Vendor could be required to provide a new working heat pump.
- Finally, you might take some time to consider whether there is any damage to the property and what is damage? Damage not causing the property to be untenantable renders the property subject to an insurance claim, fixing or possible retention. The property should be in the same state of repair as when the purchaser entered into the contract, but what say you removed Tv’s, mirrors, pictures leaving holes – some purchaser’s might consider this damage.
Its always a good idea to check with your lawyer when signing the final paperwork if you have any concerns.