Joint Tenancy vs Tenancy in Common in NSW: How Joint Property Affects Islamic Estate Distribution

Introduction

Muslim families purchasing real estate in New South Wales must carefully consider how their property ownership structure impacts their Islamic estate planning. When property owned jointly is held as joint tenants, an automatic right of survivorship applies under civil law, meaning the asset bypasses the deceased estate and transfers directly to the surviving beneficiary. This arrangement conflicts with Islamic law, which requires that any joint property be distributed according to faraid rather than passing automatically.

This article explains the differences between joint tenancy and tenancy in common for Muslim co-owners so you can align your estate plan with Sharia objectives. Also, this highlights why consulting an international estate planning lawyer is important to verify your will and joint ownership agreements comply with both civil and religious obligations.

Joint Tenancy & Tenancy in Common in NSW for Muslim Families

The Right of Survivorship in Joint Tenancy

When a property is owned as a joint tenancy, all co-owners hold an equal interest in the asset. This form of joint ownership includes a feature known as the “right of survivorship.”

The right of survivorship means that if one joint tenant dies, their interest in the property automatically passes to the surviving joint tenant or tenants. As a result, this transfer creates several key outcomes:

• Bypasses the Will: The transfer occurs regardless of any instructions left in the deceased person’s Will.
• Excluded from the estate: The jointly owned property does not become part of the deceased estate.
• Unavailable to beneficiaries: The asset cannot be distributed to beneficiaries named in the Will.

How Tenancy in Common Protects Your Deceased Estate

A tenancy in common allows two or more people to co-own property in defined shares, which can be equal or unequal. For instance, one person might own a 70% share while another owns 30%.

Unlike a joint tenancy, this type of property ownership does not include a right of survivorship. Therefore, when a tenant in common dies, their specific share of the property does not automatically transfer to the other co-owners. Instead, their share becomes an asset of their deceased estate, which ensures the deceased’s portion can be distributed as follows:

• According to their Will: The property share is distributed based on the instructions left by the deceased.
• Under intestacy laws: If a tenant in common dies without a Will, their estate is distributed based on the intestacy laws outlined in legislation such as the Probate and Administration Act 1898 (NSW) (‘Probate and Administration Act‘).

How Joint Property Ownership Affects Islamic Estate Distribution

The Islamic Concept of Co-Ownership or Shirkat al-Milk

In Islamic law, the primary form of joint ownership is known as Shirkat al-Milk, where multiple individuals hold specific, defined shares in a property. Unlike the Australian legal structure of joint tenancy, there is no automatic right of survivorship under this Islamic concept. As a result, each owner’s portion is clearly established.

When an owner passes away, only their distinct share becomes part of their deceased estate. Meanwhile, the surviving co-owners retain their original shares, and the deceased’s portion is distributed according to Islamic inheritance rules. Furthermore, this principle applies to various assets, including:

• Real estate; and
• Business partnerships, which are often structured as a Musharakah where partners share profits and losses.

Distributing Your Share According to Faraid

Upon the death of a Muslim joint property owner, their share must be managed in accordance with Islamic law. Consequently, the process involves several key steps before the final distribution to heirs:

• Identifying the share: The deceased person’s exact share of the jointly owned property is identified and separated to form their estate.
• Settling debts: From this estate, all outstanding debts and obligations must be settled.
• Executing bequests: Following the settlement of debts, any valid bequests made in an Islamic Will, or Wasiyyah, for up to one-third of the estate to non-heirs are executed.

Ultimately, the remaining portion of the estate is then distributed among the legal heirs based on the fixed Quranic shares known as Faraid. The specific shares depend on which relatives survive the deceased, but common heirs include:

• Spouses;
• Children;
• Parents; and
• Siblings.

Reconciling these principles with civil law, particularly the right of survivorship in a joint tenancy, requires careful planning. Consulting with a lawyer experienced in international estate planning is important to ensure property structures and your Will are compliant with both Australian and Islamic law.

The Impact of NSW Notional Estate Laws on Your Joint Property

Understanding Notional Estate in NSW Succession Law

New South Wales has a unique legal concept known as a notional estate, which can affect how property is distributed after death. Under the Succession Act 2006 (NSW) (‘Succession Act‘), the Supreme Court of NSW has the power to treat certain assets as part of a deceased estate, even if they are not legally owned by the deceased at the time of death. Ultimately, this is done for the purpose of making Family Provision Orders.

This mechanism is designed to ensure fairness for eligible claimants, such as spouses or children, who may not have been adequately provided for. Consequently, assets that can be designated as part of a notional estate include:

• Property held as joint tenants, where ownership would otherwise automatically pass to the surviving owner;
• Superannuation death benefits;
• Interests in a family trust; and
• Property gifted or transferred for less than market value within three years before death.

As a result, the notional estate provisions mean that property owned jointly under a joint tenancy is not guaranteed to pass entirely to the surviving co-owner if a successful Family Provision claim is made, making it wise to consult with wills and estate planning lawyers.

A Past Case Study of Boyd v Roberts 

The case of Boyd v Roberts [2024] NSWSC 1310 illustrates how notional estate provisions operate. In this matter, Peter Roberts passed away without a will, leaving behind his second wife, Kerrie, and an adult daughter from a previous marriage, Eliza. The majority of his wealth was held in joint bank accounts with Kerrie, which passed to her automatically through the right of survivorship.

Subsequently, Eliza made a claim on the deceased estate for provision, and the court found it would be fair for her to receive a portion of the assets. Using the notional estate provisions in the Succession Act, the court ordered that $450,000 from the joint bank account be paid to Eliza. This decision was made even though the account was technically no longer part of the estate and had legally passed to the surviving joint tenant.

Aligning Your Property Structure Choices with Sharia Objectives

Why Tenancy in Common is Often Preferred for Shariah Compliance

Tenancy in common is generally considered the most suitable property ownership structure for adhering to Islamic law. This is because it allows each co-owner to hold a distinct and separate share of the property, meaning there is no right of survivorship.

When a tenant in common dies, their specific share becomes an asset of their deceased estate. This structure ensures the deceased’s portion can be distributed to their rightful heirs according to Faraid.

This aligns with the Islamic principle that a person’s wealth must be divided among all eligible beneficiaries after death, preventing the automatic transfer that occurs under a joint tenancy.

The Importance of Consulting an International Estate Planning Lawyer

Reconciling Australian civil law with Islamic inheritance principles requires careful planning and specialised knowledge. Engaging Islamic wills and estate lawyers is important to ensure that your property ownership structure and your Islamic Will are compliant with both legal systems.

An experienced lawyer can assist you by:

• Providing guidance on structuring your assets, such as holding property as tenants in common, to facilitate distribution according to Shariah.
• Drafting a valid Islamic Will (Wasiyyah) that clearly documents your intentions and works within the framework of local laws.

Ultimately, this professional advice helps prevent potential conflicts and ensures your estate is managed in accordance with your faith.

Conclusion

Choosing between joint tenancy and tenancy in common is a critical decision for Muslim families in NSW, as the automatic right of survivorship can conflict with the requirement for property to be distributed according to Faraid.

To ensure your property ownership and Islamic Will are compliant with both civil and Shariah law, seeking specialised legal advice is essential. Contact the Islamic wills and estate lawyers at LawBridge for guidance on structuring your joint property and assets to protect your beneficiaries and honour your faith.

Frequently Asked Questions