Co-ownership is when two or more people own and live in a home together. The individuals usually share a common place such as the kitchen or separate dwellings within the house. It is one of the ways individuals could enter the housing market and open their doors to perhaps larger properties. Responsibilities for care and upkeep of the house are shared.
With the current housing market, one needs to find innovative ways to own a property. Sole ownership or individually owned properties seem like a matter of the past especially in the Greater Toronto Area. The government of Ontario is heavily encouraging folks to consider Co-ownership as the growing metropolitan area struggles to supply the demand. The Ontario government released a “Co-owning a Home” guide which you can find here for more information.
Let’s talk about the basics of co-ownership, co-owners either have equal shares of the property and equal decision-making power or different levels of shares and decision-making power. As well, you can co-own as a group of individuals or as a corporation. Deciding the legal technicalities is a crucial part of starting the co-ownership process. You must understand the ownership structure, liabilities and responsibilities of the co-ownership method you undertake.
There is no one right way however there is a way that works best for you. When undertaking a co-ownership opportunity, you must reflect on the type of relationship you have with the other co-owners.
For the purpose of this blog post, we will uncover only the co-ownership as a group of individuals as that is more commonly used than co-ownership as a corporation. While there are tax and other advantages to owning via a corporation, it depends on your ability to function under the corporation. For co-ownership as a group of individuals, there are two sub-type methods: tenants-in-common and joint tenants. The tenants-in-common passes the ownership to the estate if one of the co-owner dies and the other co-owners do not automatically gain the share of property. In the joint tenants ownership, the other co-owners inherit the deceased’s share.
The benefits of co-ownership are affordability, access to more neighborhoods and a sense of community. Having a group of individuals collectively pitch toward a house, and assume collective responsibility for the care and upkeep of the property. However, the cons are that you must understand your legal positioning and understand how to get out of the co-ownership. It’s easier to get into a co-ownership than getting out of one.
Tips for Co-ownership:
- Have a lawyer review your contract. The co-ownership agreement should include the use of the property, dispute resolutions, exit/entry provisions, financial and insurance arrangements. The duties and responsibilities of the home operation and upkeep must be clearly outlined. The share of ownership and the decision-making power must also be clearly stated.
- Understand your finances and the right mortgage product for your situation. With continuously innovative ways of purchasing a home, the lenders are also changing their restrictions and products. There are co-ownership specific products by Meridan to provide the right mortgage product.
- Research the zoning laws and regulations to see if the co-ownership is permitted.
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