Legal Issues to Think Of When Co-Owning a House

Tuesday Feb 11th, 2020


For people who can’t afford to buy property on their own, there’s co-ownership. This allows homebuyers to split the cost of buying a home with friends, co-workers, roommates, family members, or even strangers. Co-ownership is becoming more common these days as housing prices rise and buyers are looking to share the financial and physical burden of owning a property.

Co-ownership may sound like a win-win situation, but there are many legal issues to factor in when going in on a house with other people. Here are just a few of them.

You will need a lawyer

To tackle any legal problem that may come up, you have to have a real estate attorney. It’s hopeful to think that you and your co-owners will reach an agreement amicably should any issues arise, but you should approach co-ownership like you would any business deal and treat everything like a transaction with major risks and rewards. A lawyer can help guide you through all the legal issues while protecting everyone’s investment, starting with everyone’s rights responsibilities, and obligations.

In some cases, it might be helpful for each owner to have their own separate lawyer, particularly if there is an unequal investment in the property.

You have to agree on the structure of the ownership

There are two types of co-ownership structures: “joint tenants” and “tenants is common.”As co-owners, you’ll have to decide which one works best for your situation. The main difference comes down to survivorship, or simply put, what happens when one of you dies.

If you are joint tenants, then the surviving owner will automatically own the entire property (this is common among spouses). If you are tenants in common, each owner will have a certain interest in the house, which they can leave to anyone they choose after they die. This is the most common choice for co-ownership situations, as it allows each person to leave their portion of the house to someone they know like a family member.

You have to think about the what-ifs

What happens if an owner wants to move out? What if an owner gets married or has a child? What if an owner wants to sell the house but the other owner doesn’t? What if an owner loses their job and can’t make their payments? What of one owner wants to renovate but the other wants to let the house age?

There are just a handful of scenarios you have to think about when entering into a co-ownership agreement since lots can change in 5, 10, 20-plus years. It’s important to work with your lawyers to state what will happen in each of these scenarios, and it’s especially important to get it in writing at the beginning of the process before emotions and resentment starts clouding everyone’s judgement.

You have to create a financial plan together

Each owner will be responsible for paying their share of the mortgage, but you still have to address how al the other bills will be paid, such as electricity, internet, insurance and maintenance. Co-owners may want to open up a joint bank account for savings towards home repairs. Whatever you decide together, get it written down in a legally enforceable agreement.

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