Six Frequent Questions about Co-Ownership Agreements
It is essential that an agreement is created with all partners and the contents of any wills or spousal agreements are shared with your lawyer as they prepare your co-ownership agreement so that they align and do not conflict with one other. It may seem very intimate to share your Will with co-ownership partners whom you may have just met, but this transparency will help resolve any dispute about what happens in the home. Your co-owner partners will thank you for it.
Here are six frequently asked questions we often get about co-ownership of residential property:
1. If I’m buying a property with family, do I need a co-ownership agreement?
A legal agreement is always recommended even in the most trusting relationships. With families, the agreement can state each partners % of ownership. If the family partners have children, an agreement provides clarity of each child’s share.
2. How can we ensure that the partners maintain control of who buys into the co-ownership arrangement if one partner exits the agreement?
The legal agreement needs be a tenants-in-common agreement and clearly state what happens upon the exit of one partner. It should define at minimum:
- approval rights, such as right of first refusal, for selecting new partners
- who has obligation to find new partner (usually the exiting partner)
- time allowed for the transition
- details of required process (e.g. use of registered realtor)
3. If we buy as a couple, and one of us wants to leave, how do we get our money out of a co-owned home?
The home will be considered a ‘matrimonial home’. This asset will be divided like other joint assets of the marriage. Even as married life partners, it is better to enter into a tenants-in-common agreement as individuals, not as a couple, in case of such events. Co-ownership rights can also be covered off in a marriage contract.
4. What are the advantages of a ‘tenants in common’ agreement?
We can be very specific about exactly how a partner’s share of a co-operative property can be handled in all circumstances: death, divorce and default. It is the agreement that must be used in co-operative real estate purchases.
5. What are the circumstances you would choose ‘joint tenants’?
This agreement works with uncomplicated, close personal relationships, like siblings, that are comfortable with joint ownership. When one partner dies, the remaining partners inherit the share. It doesn’t have to go to an estate.
6. How can we avoid a partners’ ‘estate’ inheriting the share of the house?
Make sure that you have a tenants-in-common agreement and ensure that it is very specific about what happens to this portion of the property, especially the rights of first refusal regarding new owners.
Aura LLP is Ontario’s leading law firm in co-ownership of residential and commercial property. We have helped dozens of co-owners structure their agreements, and close on their perfect home. Contact us to learn more about how we can help you.