Whether it be due to a lack of affordable new housing, competition from foreign investors, stricter mortgage requirements, or rising home prices, it is becoming increasingly difficult for individuals to purchase real estate in British Columbia on their own. Therefore, investors are turning to creative ways to break into British Columbia’s real estate market – with many purchasers viewing co-ownership as an attractive option for doing so.
There are a number of benefits from investing in real estate through co-ownership, including the ability to pool resources and save up for a down payment quicker than one could on their own, a greater likelihood of being approved for a mortgage, and sharing the costs and responsibilities for managing the property in the future.
Although there are many benefits to co-ownership, there are certain risks that you’ll want to address before purchasing a property with someone else. For example, how will the ongoing decisions be made for the management and maintenance of the property, and what happens when one of the owners wants to sell their interest?
Protect Your Investment With A Co-ownership Agreement
Working with a real estate lawyer to prepare a co-ownership agreement will allow you to create a set of legally binding rules which will address the responsibilities and obligations of the co-owners.
A few of the main topics that your co-ownership agreement should address include:
- How much money each co-owner will contribute to the down payment and other closing costs;
- How the owners will take title to the property (as tenants-in-common or joint tenants);
- What percentage of ownership in the property will be allocated to each owner;
- Whether the owners intend to live in the property or rent it out;
- To what extent is each co-owner responsible for mortgage payments;
- What happens if one owner can’t satisfy their obligations (including the failure to contribute to mortgage payments or other expenses);
- Who is responsible for the payment of utilities, taxes and insurance;
- Who gets to use which areas of the property;
- Who is responsible for day-to-day management and maintenance of the property;
- How major decisions are to be made, including when the consent of all co-owners is required (for example, major renovations or expenditures of over a certain dollar amount);
- What happens when one co-owner wants to sell their interest in the property;
- How the fair market value of the property and each of the co-owner’s interests are determined; and
- How funds are to be divided upon the sale of the property.
Although we recommend entering into a co-ownership agreement at the start of the investment, a co-ownership agreement can be prepared at any stage of shared ownership with the consent of all co-owners.
Contact the real estate lawyers at Morris Law for advice and assistance on preparing a co-ownership agreement that not only reflects your unique circumstances, but also addresses a number of scenarios in advance which will protect your investment and reduce the potential for conflict in the future. We provide a variety of legal services at Morris Law; contact us using the form below for more information.