Although most people aspire to own their own home, the great Australian dream may be out of reach for some.
But if you’re prepared to team up with a close friend, colleague, relative or partner, co-ownership could be one way to get your foot on the property ladder.
And plenty of savvy sellers are pitching properties designed for “dual living”.
Real Estate Institute of Queensland CEO Antonia Mercorella talks about co-ownership and how to overcome the risks, warning it is essential to get legal advice before taking the plunge.
Joint tenants v tenants in common
When buying a property with other people, you’ll need to determine the right ownership structure – there are two main options, joint tenants and tenants in common.
“There are important differences between these ownership options and legal advice should be sought before determining the best way forward,” Ms Mercorella said.
“Joint tenancy is most commonly used by couples and people in longer term relationships.
“Under this form of ownership, all joint tenants have equal ownership and interest in the property.
“A right of survivorship also attaches to this form of ownership meaning that if one of the joint tenants die, the property will automatically pass to the surviving joint tenant, irrespective of any provisions in the will of the deceased.”
Tenancy in common differs in that each person owns their own share of the property in equal or differing sizes, so it’s a good option if you’re purchasing with someone other than your spouse, or if you and your partner have children from a previous relationship to whom you wish to leave your assets in your will.
“For example, if party A and B have each contributed $250,000 to the price of the property but party C has contributed $500,000, then parties A and B would each own a 25 per cent share and party C would own a 50 per cent share,” Ms Mercorella said.
The benefits of co-purchasing
If done right, co-purchasing a property can open up several opportunities, including the opportunity to buy in a more desirable suburb due to a combined borrowing power, to save the 20 per cent deposit faster and without as much personal sacrifice and to share the household expenses.
But Ms Mercorella said it can be a legal minefield if things go wrong.
“Even though on day one all parties may have commonly shared objectives, things can and do change. For this reason, a co-ownership agreement is a must,” she said.
“This type of agreement outlines the rights and obligations of each party with a share in the property. If a dispute or an unplanned situation arises, it can be a godsend, saving you from costly legal bills and unnecessary heartache and stress.”
Co-ownership agreements should be prepared by a solicitor taking into account the individual needs and wants of the parties, according to the REIQ.
“If you go in with your eyes wide open, co-ownership can be a great option for those who can’t get into the market individually,” Ms Mercorella said. “Just remember to choose your co-purchaser carefully, and always seek legal advice.”