With rising housing costs, many buyers are exploring co-ownership with friends, relatives, or significant others to make homeownership more affordable. While this can be a smart financial move, it requires careful planning and a clear understanding of the legal and financial implications.

The Rise of Non-Spouse Co-Ownership

Recent real estate market trends show a surge in non-traditional homeownership arrangements:

• 62% of homebuyers co-own property with at least one other person.

• 50% co-buy with a spouse or partner.

• 14% purchase homes with friends.

• 12% buy with relatives.

The primary reason for this trend? Affordability. However, while co-ownership can ease financial burdens, it also comes with challenges that require strategic planning.

Key Challenges and Legal Considerations

Even the strongest relationships can be tested by the complexities of joint homeownership. Disagreements over finances, property maintenance, and lifestyle differences can arise. To avoid conflicts, establish clear expectations in a legally binding co-ownership agreement that addresses:

Financial Responsibilities

• How will the down payment, mortgage, taxes, and maintenance costs be divided?

• Will a joint account be used for shared expenses?

• What happens if one owner fails to meet financial obligations?

Exit Strategy

• What if one co-owner wants to sell their share?

• Will the other owners have a right of first refusal?

• How will the property be valued in a sale?

Ownership in Case of Death or Incapacity

• How will ownership be handled if one co-owner passes away?

• Does the ownership structure align with estate planning goals?

Usage and Responsibilities

• Will the property be a primary residence, vacation home, or investment property?

• How will household chores, maintenance, and repairs be divided?

• What mechanisms will be in place for dispute resolution?

Establishing the Right Ownership Structure

Understanding your legal ownership options is critical. The structure should be clearly defined in the property deed:

• Joint Tenancy with Right of Survivorship – Each co-owner has an equal interest, and ownership automatically transfers to the surviving owner upon death.

• Tenancy in Common – Ownership shares can be equal or unequal. Each co-owner's share passes to their designated heirs, not the other co-owners.

Consulting a real estate attorney can help determine the best structure based on your unique circumstances.

Protecting Your Interests with a Co-Ownership Agreement

A comprehensive legal agreement should outline:

Financial Obligations

• Each owner's contributions to mortgage payments, taxes, insurance, and maintenance.

Usage and Access

• If it's a vacation or investment property, how will usage be scheduled?

• Rules regarding guests and shared spaces.

Maintenance and Repairs

• Who is responsible for upkeep, major repairs, and ongoing costs?

• Whether a joint fund will be established for maintenance expenses.

Dispute Resolution

• Mediation or arbitration should be required before litigation.

• A buyout clause should outline how one party can exit ownership fairly.

Estate Planning for Co-Owned Property

Your estate plan should address what happens to your ownership share after your passing:

• Tenancy in Common owners should specify in their will who inherits their share.

• Joint Tenancy automatically transfers ownership but should still be addressed in estate planning.

• A Trust can prevent probate delays and ensure a smooth ownership transition.

• Life Insurance can provide financial security for a co-owner to cover mortgage obligations or buy out a share.

Regularly review and update your estate plan, especially after major life changes or adjustments in co-ownership arrangements.

Final Thoughts

Buying a home with a friend, family member, or partner can be a great way to achieve homeownership, but it requires thorough planning. A legal co-ownership agreement removes risks and lays the foundation for a successful partnership.

If you're considering co-ownership, consult with our legal team to ensure you protect your financial and legal interests.