Co-Purchasing Property? The Right Agreement is Essential
Property and real estate disputes can quickly become complicated. If you become involved in any dispute over property ownership, promptly schedule a legal consultation with a Toronto real estate lawyer who will explain your rights and take the appropriate legal action on your behalf.
Co-ownership agreements help Ontario property owners avoid legal disputes by putting solutions in place before disputes can emerge. Clear, written communication is crucial when real estate is co-owned, whether you are a co-owner with family members, friends, or business associates.
If you co-own a property with one or more parties in Ontario, or if you are considering co-ownership, keep reading this brief introduction to the topic. You will learn what a co-ownership agreement is, why you may need one, and how to prepare and establish that agreement.
What Does a Co-Ownership Agreement Accomplish?
Like any major purchase or investment, a real estate transaction always involves the potential for financial risk. The sound advice that you have always heard about business deals – Get it in writing! – doubly applies to a real estate transaction.
Put simply, when two or more people jointly own a property, a co-ownership agreement is a legal document – that is, a legally binding contract – that spells out the conditions and terms for how the ownership will be shared and for what will happen if one of the owners dies.
Co-ownership documents for property owners may, for example, determine how a property’s costs will be shared and how earnings from renting or selling the property will be distributed. If a dispute among co-owners emerges, your co-ownership agreement will protect your investment.
What is Joint Tenancy and Tenancy-in-Common?
Co-ownership offers practical advantages. Cost-sharing can make a property affordable, but co-owning also entails risks. Co-owners may disagree, for example, about whether to rent or sell a property or build on a property. Co-ownership agreements can reduce or eliminate such disputes.
Several different types of co-ownership agreements allow you to co-own real estate in Ontario, including joint tenancy and tenancy-in-common:
- A joint tenancy agreement carries a right of survivorship, so that when the co-owner of a property dies, that party’s share of the property goes to the remaining owner or owners.
- When the co-ownership agreement is a tenancy-in-common agreement, a deceased owner’s share passes to that person’s heir or heirs.
A real estate lawyer can help you determine what type of co-ownership agreement is right for you.
What Should a Co-Ownership Agreement Address?
A co-ownership agreement should clearly set forth the conditions, terms, rights, responsibilities, obligations, and options of the property’s co-owners. Specifically, an effective co-ownership agreement should answer these key questions:
- How much will each of the owners initially contribute?
- How much will each owner be liable for ongoing costs like taxes and insurance?
- What happens if an owner dies or if an owner can no longer pay his or her share?
- How and under what conditions will the property be sold?
- What happens to the proceeds from the property’s sale, and how are they distributed?
- Will one or more of the owners be using the property as a residence?
- What happens if one or more owners want to sell, but one or more others do not?
How Does a Co-Ownership Agreement Work?
It is important to have a flexible, adaptable co-ownership agreement. After an Ontario real estate lawyer helps you prepare a co-ownership agreement, that lawyer can also help you revise the agreement as needed – so long as all of the owners agree to any new terms and conditions.
Your co-ownership agreement ensures that you and your co-owners agree upon your expectations and intentions for the property; for example, will the property be strictly an investment, or will it become a residence for one or more of the owners? Ideally, once the agreement has been signed, no issues will surface that will require you to go back and examine the agreement.
After the signing, the co-owners should then turn to their co-ownership agreement only if they cannot resolve a disagreement or dispute informally among themselves. A properly drafted co-ownership agreement can conceivably save you thousands of dollars in legal fees.
When Should You Prepare a Co-Ownership Agreement?
A co-ownership agreement should already be prepared when co-owners close on a property, but if you are the co-owner of a property and you do not now have a co-ownership agreement in place, it’s not too late.
The right Toronto real estate lawyer can prepare an effective, legally binding co-ownership agreement for you and for your co-owners at any time during your ownership of a property.
However, even when you have the right co-ownership document in place, it is essential to remember that it is your ongoing relationship with the other owners that will determine the eventual success (or failure) of your co-ownership arrangement.
What Else Should You Know About Real Estate Disputes?
A co-ownership agreement may prevent disputes among a property’s owners, but it can’t prevent disputes with other parties. A property owner may have to deal with boundary disputes, property tax issues, leasing issues, zoning and land use issues, and other matters that may be in dispute.
If you become involved in any type of real estate dispute or disagreement, schedule a consultation at once with an Ontario real estate lawyer who routinely deals with real estate issues, and ask that lawyer to advise you regarding your options.
Consulting a lawyer does not necessarily mean going to court. In most property disputes, the real estate lawyer who represents you will seek to negotiate a private settlement before taking your case to court. In fact, the majority of these disputes are settled out-of-court.
How Should You Select a Real Estate Lawyer?
The legal team at Financial Litigation works routinely with property owners to resolve their property-related disputes. We will work aggressively and effectively on your behalf for the best possible outcome, but if no private settlement is possible, we will fight for you in court.
At Financial Litigation, our clients receive legal advice they can count on. Our lawyers are considerably experienced in business law and real estate law, and we have successfully represented clients ranging from individual homeowners to large corporations.
If you become involved in any dispute over a property in the greater Toronto area, or if you need to have a co-ownership agreement prepared and established, arrange to speak with a real estate lawyer at Financial Litigation by calling 416-769-4107, and let us put the law to work for you.