Owning a property involves a lot of closing costs, responsibilities, and duties. In our current economy, it has become harder and harder for people to purchase their own properties by themselves when compared to how it was fifty years ago. With prices going up alarmingly, higher inflation and rates, it can all be quite overwhelming to navigate through the real estate world, especially if you are a first-time buyer.
That is one of the main reasons co-ownership agreements Calgary have become more popular when purchasing a property such as a residence. Owning property together with a family member such as a spouse was always quite common, but now the novelty is signing agreements with non-family members. It can be a smart move to share a house with friends, but it is important to remember that it comes with risks. Entering a mortgage with other people, for example, can have serious consequences if it does not go as planned.
But what is a co-ownership agreement?
A co-ownership agreement is a legally binding document that dictates the roles and responsibilities of all parties related to the shared ownership of a property. It includes things like ownership interests, financing, and maintenance of the property.
Those agreements are drafted for different purposes, such as the purchase of a residence or the purchase of property for investment. It can also be tailored to reflect each case’s needs, like how the title will be taken—will it be joint tenants or tenants-in-common? What changes can be made to the property and who has to approve it? How can an owner leave the agreement, and how can another one join?
Although it seems easy in theory, the reality of co-ownership agreements can be trickier than expected.
What do you need to know?
Buying a property is a lot of work. Buying a property with other people is even worse. There is a lot of paperwork and legalese involved when drafting a co-ownership agreement, and it is in those moments that experienced lawyers in Calgary will be your best tool.
One of the things that most people get into trouble with is mortgages. When doing a co-ownership agreement all parties will need to be involved with the mortgage in proportion to their ownership. That is, they will need to prove good credit standing, a reliable source of income, and plans in case of unexpected events such as job loss, or death, and make plans if one co-owner decides to leave the agreement. The lender will want to know why there are more people involved with the ownership agreement and may ask for details as well as which securities are in place.
So, while technically you can have a co-ownership agreement with anyone, you should think very hard about whom you are making an agreement with and which paths forward you can take. Having dispute resolution clauses may help very much in the long run as well.
When are Co-Ownership Agreements Used and How?
Co-ownership agreements, as previously mentioned, can be done technically with anyone. The main difference is that normally it is either a joint tenant’s agreement when it is with someone close such as family, and tenants-in-common when it is with someone outside of this spectrum.
As co-ownership agreements begin to be drafted with the help of a lawyer, they will change as they meet all specific needs and intentions of the owners. Clauses that may appear depending on each case can be about who is entitled to live and for how long in the property—examples of this are vacation homes, the appointment of ownership of the property, in which manner profits are distributed between co-owners if the property is an investment, consequences from unexpected events such as death, mechanisms of dispute resolution, and how the parties will deal if one of the co-owners fail to do their duties and responsibilities.
The agreements are extremely useful tools and when done correctly can greatly help the purchase process of any property that you have chosen to acquire together with someone. They can make trustful relationships stronger as all parties agree to take part in it, facilitate business interactions between partners, and even make family disputes easier—imagine for example an amicable divorce where both co-owners decide to not sell the property they owned but instead chose to share profits from rent.
Overall, co-ownership agreements must be done carefully and with the right people—and even then, there must be clauses to deal with an unexpected turn of events. After all, parties have gone over all most common issues—intended contributions, how will mortgage work, how the property will be shared, and liability, for example—and an agreement is drafted by a lawyer, they are very useful tools to help you into the real-estate market earlier and easier.