Co-Owning a Home

Disclaimer: This article on Co-Owning a Home is intended for the purposes of providing information 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.

Whether it is to buy an investment property, due to changing life circumstances, such as a divorce, or because of raising interest rates, more and more people are opting to co-own a home with another party.  In fact, we recently learned that there are mixers and apps to match potential co-owners together!

While you may be considering the benefits of sharing costs, the reality is that this is not a decision that should be made lightly.

Just as you wouldn’t purchase a home without considering whether it was the right house for you, you don’t want to purchase a home with someone without asking key questions first. In fact, we strongly recommend that anyone co-owning a home should enter into a co-ownership agreement that will set out the rights and responsibilities of the owners.

For clarity, when we talk about co-owning a home, it applies to owning a property with anyone (including children, parents, siblings, etc.) who is not your spouse. Any property owned with your spouse is covered under the Family Law Act.

This article will highlight three questions to ask before buying a home with someone else. Of course, your situation and interests are unique to you. It is always best to talk about these issues with a lawyer who can help you protect your interests and be proactive about any issues that may come up.

Question #1: How will we structure the ownership?

There are two ways that individuals can co-own a property: as tenants in common or as joint tenants.

Tenants in common means that each owner owns a defined percentage of the property. This ownership can be equal (50/50) or unequal. For example, you may own 60% and your co-owner owns 40%. You can sell, borrow against, or will your undivided interest at any time (subject to the terms of any co-ownership agreements.

A joint tenant relationship means that each owner owns an equal interest in the property. If one joint tenant dies, their ownership interest will automatically transfer to the surviving joint tenant(s). There are four criteria that must all exist in order to be considered a joint tenant:

1. All joint tenants must acquire ownership interests at the same time;
2. All joint tenants must acquire title by the same deed or will;
3. All joint tenants must hold an equal and undivided interest in the property (for example, 50/50); and
4. All joint tenants must hold an equal right to possession of the property

If any of these criteria are not met,  then the joint tenants will be considered tenants in common.

Question #2: Who will be responsible?

It is important to determine who will be responsible for what when co-owning a home. This includes things like:

• Making the mortgage payments;
• Paying the property taxes;
• Paying for repairs and maintenance; and,
• Carrying insurance on the property.

Who is responsible for making sure that the house remains in good repair and is well-kept?  It is important to have an agreement that sets out each owner’s expectations and responsibilities.

Question #3: What happens if…

When purchasing property with your relatives or friends, it is hard to imagine anything going wrong.  Unfortunately, things can change and it is important to plan for all eventualities.

This is where you’re going to want to use your imagination and think of many possible scenarios. For example, what would happen if an owner:

• wants to sell the property;

• wishes to make improvements or changes;

• tries to borrow money against their interest in the property; or

• passes away?

What would happen if one or more of the owners could not agree or resolve a dispute?

A good real estate lawyer will be able to help you plan for these potential scenarios by including terms in your co-ownership agreement. For example, the agreement could state that if one owner wants to sell the property, the other owners will have the first right of refusal. Or, if an owner wants to borrow money against their interest, they may need to get the consent of the other owners first.

It is much easier (and cheaper) to plan for these issues when everyone is on the same page at the beginning rather than try to deal with them after they arise.

It’s not too late!

What if you already co-own a property?  You may still be able to put a co-ownership agreement in place. This is something that you should discuss with a lawyer to ensure that all of your interests are protected.

An ounce of prevention is worth a pound of cure!

We have represented many individuals who now find themselves dealing with time-consuming and expensive real estate litigation. Each of them was convinced that they did not need to put anything in writing – that it would never happen to them.

Don’t let this happen to you! Be proactive and have a real estate lawyer help you plan for all contingencies by drafting a comprehensive co-ownership agreement.

At Beeksma Law, our real estate litigation experience helps us identify potential issues and conflicts that may arise. We then work with you to negotiate strong contracts that will protect your interests and give you peace of mind.

If you are thinking about co-owning a property with your friends or relatives, please contact us to discuss your options. We would be happy to help!