Are you buying real estate with friends, relatives, and/or business partners?
If so, you should consider putting a co-ownership agreement in place before taking the plunge. Doing so can save you significant time, energy and money down the road.
People purchasing real estate with others will often say “I don’t need a written agreement. We all get along very well.” While that may be true, the reality is that co-ownership agreements are beneficial to address far more circumstances than simply dispute resolution. Some of these circumstances you may not have considered include:
- What happens in the event of an owner’s financial hardship?;
- What happens in the event of an owner’s death?; and
- What happens in the event an owner wants to sell their interest in the property?
Other matters that co-ownership agreements commonly document include:
- Each owner’s initial monetary contributions to the property;
- Each owner’s ownership entitlement to the property;
- Responsibility for mortgage payments;
- What circumstances, if any, require unanimous consent of all owners;
- Responsibility for the costs of property and contents insurance;
- Restrictions on use, if any, such as whether pets will be permitted in the property;
- The establishment of a fund for any specialty expenses that may arise in respect of the property, such as major repairs;
- Responsibility for expenses such as utilities, taxes, strata maintenance fees, cable, internet, and general upkeep of the property;
- Each owner’s entitlement to use of the property; and
- If the property is rented, how rental income is distributed.
As this list demonstrates, establishing a written agreement between the owners up front can help avoid uncertainty and challenges in the future.
This list is not exhaustive and the provisions that will be included in a co-ownership agreement will vary on a case-by-case basis.
This article is intended to be an overview of the law and is for informational purposes only. Readers are cautioned that this article does not constitute legal or professional advice and should not be relied on as such. Rather, readers should obtain specific legal advice in relation to the issues they are facing.