Enter the Housing Market: Co-Ownership

Breaking into the lucrative B.C. real estate market is increasingly out of reach for many due to the ever-increasing cost of property in the province. To purchase a property in B.C. more affordably, many are choosing to purchase with a family member or friend. Co-ownership can provide an easier pathway for many to purchase a first home or investment property. However, there are some important considerations for buyers using this method.

Why Co-Ownership?

There are many reasons that people may consider co-ownership when purchasing a property. The potential benefits of co-ownership can include:

• Lower entry cost per person for high-value investments;
• It is often easier to qualify for financing with a partner;
• Access to additional funds for both purchasing and maintaining the property;
• Shared responsibility for maintenance of the property.

Protecting Both You and Your Investment Partner’s Interests

While some feel that doing business with family or a friend is low-risk, remember that a co-ownership agreement protects everyone. In the case of a co-owned investment property, the co-ownership agreement will serve many purposes that benefit all parties involved. These are important considerations for anyone managing an investment property with a partner or partners. The co-ownership agreement is a good place to establish the rules for the everyday management of the property. Some examples include:

• Creating a detailed guideline for how the property will be managed on a day-to-day basis
• Laying out the individual responsibilities of each owner, big and small
• Establishing the way in which decisions will be made by the partners (eg. a vote)
• Determining how and when a co-owner can sell their portion of the investment 

Consequences for Breaching the Agreement

The other obvious purpose of the co-ownership agreement is to create accountability amongst co-owners for their responsibilities related to the investment. If a partner does not perform their duties as laid out in the co-ownership agreement, they could be considered in breach of contract and face legal and financial consequences. This protects the owners from financial injury if one owner fails to uphold their responsibilities, and can act as a guideline for what to do if things go wrong in the management of the property. This can also help avoid confusion and disagreement between co-owners throughout their time owning the asset cooperatively. Detailed co-ownership agreements can be especially important when planning your estate, as there should be no question of what will happen to your portion of the co-owned property upon your passing in order to protect your beneficiaries and your co-owner from litigation after your death.

Are There Risks to Entering a Co-Ownership Agreement?

In general, the purpose of a co-ownership agreement is to mitigate risk for the partners, protecting them in the instance that their co-owner does not fulfill their responsibilities causing harm, financial or otherwise. It also ensures the rights of each partner over the investment are known and agreed upon in case there is a dispute over the asset in the future. In this way, entering a co-ownership agreement is the best way to avoid risk when making a large purchase, though you should be certain that you will be able to fulfill your responsibilities according to the agreement, or risk being in breach of your co-ownership agreement.

When creating a co-ownership agreement, it is crucial that you are fully aware of its contents, and completely understand the responsibilities the agreement designates both to you and your co-owner(s). Your co-ownership agreement should be tailored to the unique needs of both the asset and its owners. If you’re looking to make an investment purchase with one or more other investors, or have already made said purchase without creating a co-ownership agreement, contact an experienced lawyer today to prepare you and your partners to protect your rights over the asset.

Have a question about this topic or a different legal topic? Contact us for a free consultation. Reach us via phone at 250-888-0002, or via email at info@leaguelaw.com.