Property Co-Ownership Agreements

Two people buy a property together. The title records that they are tenants in common in shares of 60 and 40, or joint tenants in equal shares. That is the whole of what the register knows about the arrangement.

It does not record that one of them paid the entire deposit. It does not record that the other is covering the loan repayments, or that only one of them is going to live there, or what happens if one wants to sell in three years and the other does not.

A co-ownership agreement is the private contract that covers all of that. It sits alongside the title rather than on it, and it binds the owners to each other.

People reach for one at three moments in particular: buying with a sibling or a friend rather than a partner, buying with an adult child to get them into the market, and investing with someone who is a business partner rather than family. In each case the ownership is genuinely shared and the contributions genuinely are not equal.

The useful clauses are the boring ones, and they are all about what happens when something changes.

Contributions and outgoings. Who pays the deposit, who services the loan, who covers rates, insurance, body corporate levies and repairs, and whether unequal contributions are recorded as a running adjustment to be settled on sale.

Occupation. Whether one owner lives in the property, and whether they pay the others anything for the exclusive use of an asset that is partly theirs.

Capital works. Whether one owner can commit the others to a $40,000 renovation, or whether that needs unanimous agreement, and how the cost is shared if the improvement benefits everyone unequally.

Default. What the others may do if a co-owner stops paying their share, which is the scenario that turns a friendly arrangement adversarial fastest.

And exit. When an owner may sell, whether the others get first refusal and on what terms, how the property is valued if they take it up, and what happens on death, divorce or bankruptcy.

This is the most misunderstood point about these agreements, and getting it wrong produces an amended assessment rather than a disagreement.

An agreement between the owners does not change the tax position. Rental income and deductible expenses are divided according to the legal interest held on the title, not according to who actually paid.

So if the title says 60 and 40, the rental income is declared 60 and 40 and the deductions are claimed 60 and 40, even where one owner has paid every bill and the agreement says so. Writing down that the higher earner will claim all the interest does not make it so.

The same principle runs through to capital gains tax. Joint tenants are treated as tenants in common holding equal shares for capital gains purposes, so a gain is split by legal interest and each owner is taxed separately at their own marginal rate.

The agreement can still record who paid what and provide for it to be squared up between the owners on sale. That is a debt between them, which is a different thing from a tax position, and it is how a well-drafted agreement handles unequal contributions honestly.

If the split you actually want is 60 and 40, the place to fix it is the title at purchase, with advice before you sign, not a side agreement afterwards.

The agreement sits on top of a choice you make when you buy, and that choice is much harder to change later.

Joint tenants own in equal shares with a right of survivorship. When one dies, their interest passes automatically to the survivors and their will has no say in it. That is usually what a couple wants and almost never what a group of friends or an investment partnership wants.

Tenants in common own distinct shares that may be unequal, and a deceased owner's share passes under their will. That is the structure that lets a 60 and 40 split exist at all, and the structure most co-ownership agreements are written on top of.

Choosing joint tenancy and then writing an agreement that treats the owners as holding unequal shares creates a contradiction between the register and the contract, and the register is what applies on death.

Our page on tenants in common and joint tenants sets out the difference in full. It is worth reading before the contract rather than after, because the tenancy is set at purchase and changing it later is a transfer, with the duty and tax consequences a transfer brings.

This is the clause that earns the agreement its fee, because the alternative is set by legislation rather than by you.

Under the Property Law Act 2023, which has been in effect since 1 August 2025, a court may appoint a trustee for the sale of co-owned land. That order converts each co-owner's interest into an interest in the proceeds of the sale, and the court may make further orders about the terms of the sale and how the proceeds are distributed.

In plain terms, a co-owner who wants out and cannot get agreement has a route to force a sale. That is a real protection against being trapped in an asset by a co-owner who will neither buy nor sell.

It is also a blunt instrument. It puts the timing, the sale process and often the price in someone else's hands, it costs money, and it tends to end the relationship it is used against.

A well-drafted exit clause is an attempt to make that route unnecessary: a notice period, a first right of refusal for the other owners, an agreed method of valuation, and a timeframe to complete. Every one of those is cheaper than a trustee for sale.

Two documents, doing two different jobs, both settled before you buy rather than after.

The title decides the legal shares, the survivorship position and, following from that, how income, deductions and capital gains are divided. That is set at purchase.

The agreement decides everything the title is silent on: money in, money out, occupation, decisions, default and exit. That is contract, and it binds only the owners.

Neither is a substitute for the other, and a co-ownership arrangement with a careful agreement sitting on a carelessly chosen tenancy is the common failure. Get advice on the tenancy before you sign the contract of sale, and have the agreement drafted by a solicitor rather than adapted from a template written for another state.