When families buy property together
Category Advice
More families are looking at buying a home together as a way to save costs and provide care for elderly parents, but things can go wrong. There are several legal considerations your clients should know about.
Many new trends have emerged within the real estate sector as a result of the national lockdown, one of which is the increase in multi-generational living. No longer able to afford the costs of living alone, many have combined households to share the living expenses. What this means for the property market is that demand for stand-alone rental properties is shrinking and the demand for properties with semi-detached flatlets is on the rise. According to reports, more than 2 million people lost their jobs as a result of the lockdown. Consequently, more homeowners have been forced to downscale or consider moving in with family members.
If you are considering such an arrangement, there are legal considerations that you need to be made aware of. There are several risks around the legal conventions that apply to joint property purchases in cases where no prior co-ownership agreement exists. These risks are often associated with the fact that no prior co-ownership agreement has been entered into by the parties. If ownership is given to one or more purchasers, without stipulating in what shares they acquire the property, it is legally presumed that they acquired the property in equal shares, regardless of the individual financial contributions of each party. Unfortunately, joint owners that have not concluded a co-ownership agreement, or have not made provision for all eventualities, often get caught up in legal action between themselves when the relationship breaks down. There can be issues, too, in the event of the death of one of the parties or if the other party sells its share of the property.
Clearly a co-ownership agreement is the place to start.
- It is important to specify the percentage ownership of each joint owner in the sale agreement
- You will need to discuss what will happen in the case of the death or disability of a member
- The co-ownership agreement should also stipulate how the property is to be used, how the costs of maintenance are to be divided, who would be responsible for the maintenance and who can occupy the property etc.
- Owners must also sign an Acknowledgement of Debt for their share of the mortgage bond in favour of the other owner/s
- Take out life insurance that would be ceded to the other party in the event of their death, in order to pay off the share of any joint mortgage bond. An income protection policy should also be in place for both parties that would pay out in the event of a disability
Author: Excerpts from Property Professional
