Brief Introduction About the Co Ownership Agreement
A co ownership agreement is defined as a legal agreement that is made between two or more individuals who have bought or who are in the procedure of buying a house together. The co-ownership agreement shall be tailored in order to suit the wants of the individuals who are buying the property.
The property that is owned by two or more individuals shall be held either as “Joint Tenants” or “Tenants-in-Common.”
Who Takes the Co Ownership Agreement – People Involved?
The sharing the ownership of property amid two or more people or entities is known as co-ownership. The co-owners could be friends, family members, or even business partners. A Co-ownership Agreement legalizes the relationship amid co-owners of a property.
Purpose of the Co Ownership Agreement – Why Do You Need It?
Co Ownership Agreement is used where:
- You are buying a property with family or friends
- You are buying property as an investment with any other people
- You are buying a property with your spouse, but you have dissimilar interests in the property; or
- You have a mortgage over the property, and you wanted to record who is accountable for repaying the mortgage as well as in what proportions.
Content of the Co Ownership Agreement – Inclusions
The property Co Ownership Agreements must comprise terms which address the following:
- the fiscal contribution of each party towards the buying of the property;
- the division of continuing expenses (which might consist of mortgage repayments, rates, as well as maintenance, for instance, painting and lawn moving) and earnings from rent;
- whether the property shall be leased and if the tenancy would be professionally managed;
- whether the co-owners could stay in the property and in that case whether they could invite others to live with them;
- the notice period one party requires towards giving the other if he or she wanted to sell;
- the price that shall be obtained for the sale of the property (and to this end, it is advisable to get a valuation from a registered valuer;
- dispute resolution process; and
- How the net proceeds of the sale are going to be divided.
How to Draft the Co Ownership Agreement
Co ownership Agreements can be of many varieties and could be tailored to your specific requirements. The common matters that must be covered in Co-ownership Agreements contain:
- Who is allowed to reside at the property?
- If a property used as a holiday house, who could use the property and at what times of the year?
- In case the property is an investment property, how the rent is going to be distributed among the co-owners
- Who is accountable for making repayments on the mortgage?
- Who is accountable for the maintenance of the property?
- How the property is going to be sold, and whether one of the co-owners decides they want to sell their share of the property?
- What takes place if one of the co-owners dies or becomes bankrupt, and
- Co-ownership Agreements would also include a dispute resolution process; in case there is a disagreement that takes place amid the parties.
Co-ownership varies from the way a husband and wife may hold a property as joint tenants (where the share of a spouse automatically passes to the other spouse on death), in place of being held as tenants-in-common, which means the share would not automatically pass on death.
A Co-ownership Agreement would not be binding in the case of the breakdown of a marriage or de-facto relationship. In case you want an agreement with your spouse or partner towards dealing with the unfortunate situation where you might separate.
Benefits and Drawbacks of the Co Ownership Agreement
The co ownership agreement documents the parties’ understanding relating to the property. The best time to choose what each individual gives and receives, and when, is before any disagreements arise. Also, creating the co-ownership agreement means that the parties should think about and resolves issues they otherwise may not consider.
- Pooling your finances to contribute the initial equity in the property
- Combining your borrowing powers towards obtaining finance on the best available terms
- Sharing the initial expense of purchasing the property
- Dividing the expenditures and net rental income from the property in several ways
- Accessing a greater range of prospective investments
- Repaying a mortgage off quicker as well as increasing net return
In case you do not have a written co-ownership agreement and a problem develops that you are able to resolve on your own, a court may wind up making important judgments for you, or even ordering the property sold.
What Happens in Case of Violation?
When you establish which joint owner has breached the agreement(1), then that owner who violated the agreement could fix their mistake, and pay for the cost of their breach, or offer to purchase out the other owner in their share of the property.
A Co-ownership Agreement is a legal agreement that is made amid two or more people who own property, and some requirements require complete understanding among the parties as to their rights and responsibilities.