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Joint Property Ownership

Real estate experts who have witnessed and analysed these situations liken the experience to couples who do not have a prenuptial agreement in place before marriage. The situation where everyone’s okay until some money is involved and everything changes. Co-ownership offers an excellent opportunity for people to dip their toes into the property market, as long as both parties understand the implications of the plethora of scenarios that may unfold and are ultimately on the same page.

ME Bank recently conducted a survey that showed joint property ownership is generally favoured by the younger generations of first-home buyers. According to the survey, a remarkable 12 percent of these buyers have made joint purchases with family members, another 14 percent with parents, and another 4 percent with friends.

General Manager Luke Easton of lending products at ME bank said the trend is growing, as more and more young people are looking at joint property ownership as an effective strategy to get into the property market.

Setting the Ground Rules

Real estate and property experts recommend that ground rules should be firmly set prior to making any big decision. This includes having an all-out discussion up front and setting the parameters straight and on paper before any purchase is finalised.

The first item on the agenda that needs to be discussed and agreed to is the length of the investment. The parties involved need to be clear as to the time he or she would want to stay in the agreement. Furthermore, the scenarios that may unfold if this time frame changes also need to be discussed and agreed to. This is to eliminate the risk of any conflict arising when one party wants to exit the agreement.

Circumstances always change based on financial, emotional or physical factors-such as when a partner decides to buy a house of his own or a sibling plans to get married. Flexibility needs to be an inherent factor in the agreement.

Joint Tenants versus Tenants in Common

For married couples, joint tenancy refers to those who are regarded as having a joint property ownership or who own a property together. Here, the property held is subject to law and when one of the property owners die, the land automatically goes to the surviving partner.

The concept surrounding tenants in common, on the other hand is a bit tricky, as the parties involved in the agreement own varying shares or portions of a property. It’s therefore crucial that each party understands what their share entails and ensures the property is well taken care of. At the very start, parties will need to have their wills stipulate their decision on what they want to happen with their shares in the event that they die.

Joint Property Ownership Problems

Many people who get into a co-ownership arrangement commit the mistake of not having enough understanding of the contract and the various problems that may arise.

This could not be explained any simpler than with the example of two friends taking out a $500,000 loan to purchase a property, let’s call them Joe and Jane. Technically Joe and Jane will owe $250,000 each.

Here, it’s a big mistake to be unaware that lending companies and banks will look at the situation of both Joe and Jane owing them $500,000 each. This is to ensure that when one is unable to pay their share of the loan, the other will have to suffer the burden of paying off the entire loan of $500,000.

Problems then arise if Jane is unable to continue paying off the loan, or if Jane wants to sell the property because she has found a more promising investment and Joe wants to keep the property.