Buying Out a Co-Owner From a Jointly Owned Property

Jointly owned property does not always stay jointly owned. Siblings who inherited a house together, friends who bought as investors, or former partners who kept the property after a relationship ended, often reach a point where one person wants to keep the property and the other wants to be paid out for their share. This is a genuine property transfer, not an informal arrangement, and it needs to go through the same conveyancing and duty process as any other change of ownership.

Why Co-Owners Buy Each Other Out

A buy-out usually happens for one of a few reasons: one owner wants to keep living in the property and the other wants to move on, an investment property's co-owners disagree on when to sell, or a family arrangement (such as siblings inheriting a home) resolves with one person taking full ownership. Rather than selling the property to a third party, splitting the proceeds, and both parties paying selling costs, a buy-out lets the remaining owner keep the asset while the departing owner is paid the value of their share.

This kind of arrangement also comes up between former partners who were not married, and between business partners who bought a commercial property together and later want to go their separate ways. The underlying mechanics are the same regardless of the relationship between the parties: one person's registered interest is transferred to the other for value, and that transfer has to be handled with the same care as a sale to a stranger, even if the conversations leading up to it feel informal.

It Is a Transfer, Not a Simple Handshake

Legally, buying out a co-owner is a transfer of that person's registered interest in the land, and it needs to be documented and lodged the same way any other property transfer is. A simple written agreement between the parties, without updating the title through the land registry, leaves the departing owner still legally on title and still potentially liable for anything connected to the property, including a mortgage they thought they had walked away from.

Valuing the Property and Agreeing a Price

Before a price for the share can be agreed, the property usually needs an independent valuation, particularly if the co-owners are not on entirely friendly terms or if a lender is involved in refinancing the buy-out. The departing owner's share is then calculated based on their percentage of ownership, less anything owed to a shared mortgage, and the terms are set out in a formal agreement that your conveyancer or solicitor prepares alongside the transfer documents.

Transfer Duty Applies to the Value of the Share

A common assumption is that because the parties already own the property together, no duty is payable when one buys the other out. This is not generally correct. Transfer duty, commonly known as stamp duty, is usually assessed on the market value of the share being transferred, whether or not the full purchase price is paid in cash, and revenue offices will expect a valuation to support the figures used. Some limited concessions can apply in specific circumstances, such as certain family law or deceased estate transfers, but these depend on the exact facts and the state or territory involved rather than being automatic.

Refinancing to Fund the Buy-Out

Most buy-outs require the remaining owner to refinance any existing mortgage into their own name, both to release the departing owner from that debt and to raise the funds needed to pay them for their share. This is typically arranged through a standard refinancing process running in parallel with the transfer, and your conveyancer will coordinate the timing so the mortgage discharge, new loan, and title transfer all settle together rather than leaving a gap where the old borrower is technically still liable.

How the Ownership Structure Affects the Process

Whether the property was held as joint tenants or tenants in common affects some of the mechanics, particularly if the co-owners hold unequal shares. Tenants in common with a documented split, for example seventy-thirty, need that split reflected accurately in the valuation and the transfer, while joint tenants are treated as holding equal, undivided interests until the joint tenancy is severed as part of the transaction.

Capital Gains Tax for the Departing Owner

If the property was an investment rather than the departing owner's main residence, selling their share to a co-owner can trigger a capital gains tax event in the same way selling to any other buyer would. The ATO's guidance on property and capital gains tax explains how this is generally calculated, though the right treatment depends on individual circumstances. This is general information rather than tax advice, and anyone in this position should speak with an accountant before agreeing on a final price.

Steps in the Conveyancing Process

Once terms are agreed, the process typically involves an independent valuation, a written buy-out agreement, preparation of a transfer document, duty assessment and payment, discharge of any existing mortgage tied to the departing owner, registration of any new mortgage, and lodgement of the transfer with the land registry so the title reflects sole ownership. Because several of these steps depend on each other, particularly the mortgage discharge and the new loan settling on the same day, using a conveyancer experienced in this specific type of transaction helps avoid a mismatch in timing.

If you are weighing up whether a buy-out makes more financial sense than a straightforward sale, it is worth getting a fixed-fee quote early so you know the conveyancing costs involved before committing either way.

Because the parties in this transaction usually know each other well, it can be tempting to use one conveyancer or solicitor for both sides to save time and cost. In most states this is not permitted where there is any potential conflict of interest, and even where it is technically allowed, each party is generally better served by having their own independent conveyancer review the figures and the agreement on their behalf. This matters most for the departing owner, who is giving up a registered interest permanently and should be confident the price and terms reflect an accurate, independent valuation rather than a figure agreed under pressure.