July 11, 2019 | co-ownership
In the last few years, I’ve noticed a huge spike in the number of clients asking me about co-ownership properties. It can be two friends buying a condo together. It can be two couples buying a duplex together. It can be four retiring friends buying a big house together with their own rooms and one kitchen and dining area. It makes sense that interest in co-ownership is spiking. In cities like Toronto, affordability can be a real issue and co-ownership can feel like something worth considering.
And there are some really appealing things about co-ownership that do make it a good idea:
- It can allow you to live in a neighbourhood that would be too expensive to buy on your own. This may help with other things to make your life easier, like a shorter commute.
- You can buy a nicer place with more people contributing to the mortgage. If you prefer a heritage home in a leafy neighbourhood over a smaller condo, co-ownership could be the ticket. It may, in fact, allow you to get into the market if you are starting off.
- You can share the burden on home repairs, taxes, and even cleaning the yard or the house.
- Depending how you do it, it’s less lonely. You can see people all the time, potential share dinner or even a drink in the summer in the back yard. This is why I hear of more and more retiring friends taking this route.
- You can feel better if you leave the house on vacation because someone will be there to water the plants, tend to the garden or have the lights on.
Co-ownerships seems like it could be a great option for a lot of people. And I do believe there are people out there that can really make it work, but, in my opinion, it’s not for most.
My experience is this: When I go out to show properties for those looking for co-ownership, there are often too many chefs in the kitchen. With more buyers on the title, it can become more difficult to satisfy everyone’s taste, especially if you are up to four or more individuals. As an example, you may have two couples buying a duplex. That means you need all four people to love a house enough to buy it. Truth be told, usually one unit in the duplex is better than the other. Someone may prefer one neighbourhood over another. It is more difficult to find the right property that will satisfy all individuals. Not impossible, but more difficult. And if the process of looking drags on too long, then one of the couples may just decide to make a go on their own for something smaller or in a less expensive area.
It can work too! The key is to really have a long and thorough discussion to make sure your idea of the property aligns with all of those going on title. Compromise, flexibility and communication are key. If those ducks are lined up, your chances of success are much greater.
The other tricky part of co-ownership: Having a very clear idea of how things will run once you do have ownership. How much will each individual contribute to the mortgage? Would each co-owner’s contribution be based on the square footage of personal space? Would it be divided evenly? Who will handle what chores? Who does the gardening? Who shovels the driveway? If you are sharing the fridge, do you share food? How would you mediate a problem if one came up? All these little things should be discussed in advance so everyone coming together on the mortgage will know what to expect.\
It is certainly possible that you can hammer out an agreement that suits everyone involved and the running of the property will run smoothly. Even then, there is a certain degree of instability involved. What if someone decides they want out because they just landed their dream job in New York? Maybe one of the couples finds out they are having triplets and needs a bigger place. Do the other people on title have first right of refusal if someone decides to leave, or can they sell off their portion of the mortgage to whomever they like?
For seniors, there are fewer life changes than a group of Millennials buying a house together, but things could happen there too. If you have four seniors who co-own a house, what happens if one passes on, or if they need certain medical care. Do you retrofit the house to accommodate change in health? If they pass on, what if their heirs don’t want to keep their share of the house? My point is that it can be a good idea to leverage co-ownership to get into the market and into something you would like to live in. But there are drawbacks. You can find yourself having to sell sooner or at a time that you don’t like because another co-owner wants to, or has to sell.
When there are several people on title, not everyone is going to be in agreement to sell at the same time. Co-ownership is riskier in many ways, but if it’s the option you want to press ahead on, then just make sure you have thought through the different scenarios with all those on title. Do your best to think through all possible outcomes that may come your way, and have it in writing on how all of the co-owners will approach any challenges that arise.