Should you buy with your lover?

A new trend has emerged in Canada’s housing market over the past few years: unmarried people buying a home together. Realtors even have a name for these close but unrelated buyers—mingles—and say they can include lovers, friends and even groups of friends.

There are advantages to sharing a real estate investment with someone else. Pooling cash and income allows the purchase of real estate beyond the means of an individual and the splitting household expenses can often make home owning less expensive than renting.

But there can also be perils in buying a home with a lover or a friend. For anyone considering such an arrangement, it best to go in with your eyes wide open and your options nailed down. For, if the arrangement doesn’t work out, the legal hassles can be messy.

In Canada there are two main types of legal joint ownership: joint tenancy and tenancy in common, with the latter the most common.

Joint Tenancy: This is a situation in which an owner has an undivided but equal share with the other owner or owners, who are listed on the title of the property. One of the main features is the right of survivorship. This means that if one of the joint owners dies, the others automatically receive the deceased person’s share, equally divided, whether or not a will exists.

Tenancy in Common: In this form of ownership, the owners can hold equal or unequal shares in the property. Each party owns an undivided share of the property. For example, there could be five people in the agreement, with four owning 1/10 of the property and the fifth owning 6/10 of the property. A person can sell his interest in the property. Tenancy in common does not carry an automatic right to survivorship as in joint tenancy. The ownership share is distributed as a will dictates.

There are various reasons why some people prefer tenancy in common to joint tenancy:

- If you are purchasing the property for investment with non-relatives, you may not want them to automatically inherit the property upon your death. You may wish to have control over who inherits the property when you die. The only way this can be dealt with is in a tenancy in common situation.

- If you are putting unequal amounts of money into the property, a tenancy in common structure would reflect those contributions in terms of the percentage interest in the property. This would not be the case in a joint tenancy.

Tenancy in common might be also be preferable if one of the owners of the property wishes to have the freedom to raise money for other purposes, such as a business. In many cases the tenancy in common portion can be mortgaged without the consent of the other parties.

Written agreements should be signed by the joint owners outlining the procedures if one of them should want out of the arrangement. This can be accomplished by offering the partner the first right of refusal to buy the other’s share. There could also be a provision requiring the consent of the other owners in approving a potential purchaser; or there could be a clause requiring a certain period of notice to the other owners before the property share is sold.

The co-ownership agreement should also include how maintenance charges will be split and what happens if one of the partners can not meet their share of the mortgage payments. The agreement can also cover the division of profits when the home is sold, and even the timing of the sale.

When your co-ownership agreement on the real estate purchase is agreed to, have your lawyer look it over. For in real estate, as in love, it is best to have protection.

By: Frank O'Brien
August 23, 2001

Copyright 2001 Inman News Features
Distributed by Inman News Features