Property Co-Ownership Arrangements – What you should consider…

A group of friends bought a property together to get on the property ladder.  They did not put in place any agreement as to the arrangements between each other, for example, what would happen if one party wanted to sell their share in the property.

One of the friends wanted to sell their share as they wanted to move in with their partner.  The friend selling nominated a price for their share of the property, which the other friends thought was too high.  They ended up in a costly legal dispute over the sale price for the share of the property.  Ultimately they all had to sell the property as they couldn’t agree.

As many people look to purchase their first home, people are considering different ownership options such as purchasing with a sibling or friend, or being helped out by parents or grandparents.  

While these creative options for ownership are assisting people to enter the property market, there are often a number issues that can arise if the parties have not set out the terms of their arrangement at the beginning. 

Unfortunately, it is often very difficult for parties to agree on what is fair further down the track, once a dispute has arisen, which can lead to costly and stressful outcomes, like the above.

Firstly, it is important that you consider potential future changes to the circumstances of the parties before you agree to enter an arrangement with friends or other third parties. 

It is advisable when looking at co-ownership arrangements, that you consider entering into a Property Sharing Agreement.  

A Property Sharing Agreement sets out each party’s intentions, rights and obligations in respect of the property.  These agreements generally include:

1.       Who will own the property and who will live in the property;
2.       Arrangements for selling the property, including if one party would like to sell their share, for example  how the property will be valued and the split of the sale proceeds;
3.       Details of what happens if one party dies, or enters into a relationship, or separates;
4.       Who is responsible for payment of the mortgage, outgoings, utilities, maintenance and capital expenditure on the property.

Entering into a Property Sharing Agreement at the beginning of the arrangements will ensure all parties are on the same page initially and will be vital in the event the property is to be sold and/or if any disputes occur.  Your experienced legal advisor can assist with drafting a Property Sharing Agreement that best meets your circumstances.