Previous posts have considered the distinction between owning an asset as joint tenants compared to tenants in common, let me know if you would like access to this content.
From time to time, we have advisers, on behalf of their clients, contact us about whether there is any advantage in ensuring an asset is owned as joint tenants so as to try to prevent a trustee in bankruptcy getting access to the asset.
The argument being that because each joint tenant effectively owns an interest in the entire property, this makes it very difficult for a trustee in bankruptcy to seize the property.
The reality however is that under the Bankruptcy Act, as soon as a person who owns an asset as joint tenant with somebody else becomes bankrupt, the joint tenancy is effectively severed, so the trustee in bankruptcy can unilaterally secure their ownership of the relevant share of the property discretely.
Where a trustee in bankruptcy gains ownership of a discrete share of a property, the remaining co-owners are able to negotiate with the trustee in bankruptcy to acquire it for market value.
The trustee in bankruptcy is however not obliged to accept the offer from a co-owner, and can proceed to sell the property on the open market.
Even if the co-owner wanted to oppose such a sale, the trustee in bankruptcy can obtain court permission for a statutory sale.
Following the statutory sale, the co-owner and trustee in bankruptcy share the proceeds in accordance with their proportionate ownership interests.
** for the trainspotters, the title here is riffed from the Kylie Minogue song ‘Spinning around’.