It seems that the goal of owning a piece of property in British Columbia is becoming more and more unattainable each time we read a news story. The headlines emphasize the growing number of barriers that are preventing individuals from investing in the real estate market, including the lack of affordable new housing, competition from foreign investors, changing mortgage requirements, and the soaring average home prices in Vancouver and other areas of the province. Here we discuss an increasingly popular option that many are relying on to getting around these barriers, which involves making the investment with another person, or as we call it: co-ownership.
Making an investment in real estate with someone else
There are many benefits that come along with co-owning real estate with another person, who may be either a family member, spouse, friend, or another individual that you trust and have a relationship with. These benefits include the ability to enter the real estate market much sooner than it would take to do so alone due to the ability to come up with a down-payment and become approved for a mortgage more easily, access to additional capital, as well as shared costs and responsibilities for managing the investment and maintenance of the property. However, it is important to understand that there are certain risks which come along with pursuing any business venture or partnership; co-ownership of real estate is no exception to this.
One of the tools that your lawyer will be able to prepare for you is a co-ownership agreement. This will govern the relationship and protect the interests of the investors by clearly setting out the rights and obligations of each co-owner.
Typical components of a co-ownership agreement include:
1. The initial monetary contribution made by each co-owner;
2. The interest or share in the property that each co-owner will gain, which is often based on the initial capital contributions of the co-owners;
3. The way in which the co-owners will hold title to the property (tenants-in-common vs. joint tenants);
4. The purpose behind the investment, including whether one or all co-owners will be living in the property or if it will be used to produce rental income;
5. How the property will be managed, and the respective roles and responsibilities of each co-owner;
6. How decisions will be made, including when unanimous consent is required from the co-owners;
7. What happens if one of the co-owners does not follow through with their obligations;
8. Rules and restrictions setting out when and how a co-owner may dispose of their interest in the property, including the terms of a co-owner’s right of first refusal to purchase the other coowner’s interest;
9. How the value of each of the co-owner’s interest will be determined; and
10.How revenue will be applied while the investment is held, and how proceeds will be split upon the sale of the property.
Protecting your investment
If you’re considering co-ownership, one of the first steps you should take is getting in touch with a lawyer to discuss your goals and concerns in order to determine what options are available to you. Your lawyer will be able to draw your attention to a variety of points that need to be considered before moving forward, and provide you with advice and guidance on how to best protect your interests.
Let us assist you
Our team of real estate lawyers will be happy to discuss your ideas and tailor a plan that suits your investment goals. Please get in touch with us when you’re ready to take the next step to breaking into the real estate market.
By: Sid Koshul
Lawyer, Ink LLP
Suite 1400 – 128 West Pender Street, Vancouver, BC V6B 1R8