Case Study: Co-Ownership Gone Wrong
Disclaimer: This article is intended for the purposes of providing information on property co-ownership only and is to be used only for the purposes of guidance. This article is not intended to be relied upon as the giving of legal advice and does not purport to be exhaustive.
We have spoken before about the importance of having a co-ownership agreement in place. It’s important because it helps avoid conflict and delineates the responsibilities of each owner.
“But that doesn’t apply to me. I’m buying a house with my very best friend – it won’t go wrong.”
That is what our clients thought too. Let’s discuss their real-life example of co-ownership gone wrong, and how to prevent it from happening to you.
At Beekmsa Law, we have seen time and time again that an ounce of prevention is worth a pound of cure. This is especially true in the case of co-ownership agreements so if you are considering buying a home with another party, speak to us first. We can help save you a lot of headaches.
Two couples (let’s call them the A’s and the B’s) were close friends. They decided to buy a home together. They found the perfect house and put in an offer, which was accepted. Couple B lived in the home and the other half was rented out.
They were so excited about the new venture that they didn’t get a lawyer to draw up a co-ownership agreement. After all, they knew and trusted each other. They felt that in the event there was a disagreement, they could resolve it as friends.
After some time, couple A decided that they would like to sell the home. Couple B liked their living arrangements and refused to sell the home. Tensions grew, as the parties disagreed on who paid for what expenses and what each party had expected going into the transaction.
That is when couple A came to us. With no agreement in place, there were two options: to come to an agreement with couple B, or to apply to the court for a partition and sale.
An application to the court would have come at a high cost – in both time and money – so the couple decided to try to come to an agreement with couple B first. This is where we were able to help.
We helped couple A negotiate with couple B, and in the end, the house was sold.
However, this is not the rosy ending we would have preferred to see. That relationship was forever damaged, and it could have all been avoided with a co-ownership agreement in place.
A Better Way – Co-Ownership Agreement
We wish that Couple A had come to us before purchasing the home and setting up a co-ownership agreement.
If a co-ownership agreement had been in place, there would have been a clear process in place for when one party wanted to sell. The disagreement would have been limited because the contract would have anticipated this, and the friendship may still be intact today.
A co-ownership agreement would have helped to avoid conflict by setting out each party’s expectations from the start. It would have addressed important issues such as:
– Who is responsible for what expenses?
– What happens if one party wants to sell the property?
– What is the procedure for making decisions about the property?
While we often go into situations expecting that everything will go well, it’s always best to be prepared for the worst. This is especially true when entering into a co-ownership agreement. Buying a property is a big investment, and you want to make sure that you are protected now and in the event anything changes in the future.
If you are considering buying a property with another person, come and speak to us first. We can help set up a co-ownership agreement that will protect you and your investment. Book a call here and our team will be more than happy to talk to you about your situation.