The importance of a co-ownership agreement when buying property with family
Buying a home with family can make getting onto the property ladder more achievable. Sharing the deposit and ongoing costs can make a real difference. However, putting a co-ownership agreement in place early helps everyone understand how the arrangement will work.
Even when everyone starts with the best intentions, circumstances can change. A co-ownership agreement helps make each person’s rights and responsibilities clear and provides a plan if things do not go as expected.
What is a co-ownership agreement?
A co-ownership agreement, also known as a property sharing agreement, is a legally binding agreement setting out how two or more people will own and manage a property.
It will usually cover:
- Each person’s ownership share and contribution to the purchase.
- How mortgage repayments, rates, insurance and other costs will be shared.
- Who can live in the property and on what terms.
- How maintenance, repairs and improvements will be agreed and paid for.
- What happens if someone cannot meet their payments.
- What happens if an owner wants to sell or buy out another owner.
- How sale proceeds will be divided.
- What happens if an owner dies.
- How disagreements will be resolved.
Recording each person’s contribution
Family members may contribute different amounts towards the deposit, mortgage repayments or ongoing costs.
Putting these arrangements in writing helps make it clear how those contributions will be treated, including when the property is sold. Your lawyer can also advise on how ownership should be recorded on the title so it aligns with your agreement.
Making expectations clear
Even within a close family, people can have different understandings of what has been agreed. Recording the details helps everyone understand their responsibilities and reduces the risk of misunderstandings later.
Each owner should obtain independent legal advice before signing, so they understand what the agreement means for them.
Planning for changing circumstances
A new job, financial pressure or a new relationship may mean shared ownership no longer suits everyone.
An agreement can set out a process for an owner to leave the arrangement, including how the property will be valued, whether the other owners have an opportunity to buy their share, and when the property may need to be sold.
It is also important to consider how the agreement fits with each owner’s will and any relationship property arrangements.
Looking after family relationships
Discussing money and property can feel uncomfortable, but having these conversations early can help avoid more difficult ones later.
An agreed process for resolving disagreements gives everyone a way forward and can help reduce the stress and cost of a dispute.
Getting advice early
Co-owning property with family can be a positive step towards home ownership. The right agreement helps everyone understand where they stand, both at the outset and if circumstances change.
If you are considering buying property with family, our property team can help you put an agreement in place that suits your circumstances. Please get in touch to discuss your plans.
This article is brief and general in nature. You should not treat it as legal advice and should seek professional advice before taking any action in relation to the matters dealt with in this post. Armstrong Murray accepts no liability for losses suffered by any person or organisation who may rely directly or indirectly on this article.
