You may be considering co-owning a property with a relative, close friend or your spouse. Whether it’s an investment property or your first home, it is important to clearly understand what the obligations and interests will be under the ownership structure you plan to enter into.
A co-ownership agreement sets out the terms and conditions and the rights and responsibilities of each party. The agreement may address the following key considerations, among other things:
- The amount of each party’s initial cash contribution;
- The amount of each party’s beneficial interest in the property;
- The amount of each party’s responsibility and liability for monthly mortgage payments, maintenance and upkeep costs, and major repairs and renovations;
- How and when the property can be sold; or
- How the proceeds will be split and paid out between the parties once
a sale of the property occurs.
Establishing how title to property is to be held is one of the most important things to consider for co-ownership agreements. The two different ways that property can be co-owned is either under a joint tenancy arrangement, or a tenancy in common arrangement.
In a joint tenancy arrangement, the joint tenants have equal share to the property, and the right of survivorship applies. The right of survivorship means that, if the death of one of the owners occurs, then the portion of the asset which the deceased owned is allocated to the surviving owner.
Tenants in common, on the other hand, may distribute the share of a property in various ways, such as 60/40 or 70/30, rather than 50/50 ownership. In this case, where the death of one of the co-owners occurs, their share of the asset becomes part of their estate, and that share is not allocated to the other owner.
At Shield Law, we will work closely with you and your family, friend, or business partner, in order to ensure that the co-owner agreement you plan to enter into fits your needs and expectations.
If you need a lawyer to draft or review your co-ownership agreement, please contact our office today.