Co-Ownership Agreements – Settling the Basics
A property co-ownership agreement is a binding contract between two or more owners which can prove essential to a successful co-ownership. Without a legal agreement in place, co-owners could end up having to go to court over petty issues, some of which could prove costly to resolve. The most common property co-ownership agreements include Tenancy in Common and Joint Tenancy agreements. With Tenants in Common, each owner has an individual share of the property. Meanwhile, Joint Tenancy agreements require all property owners to have equal shares in the property. Regardless of the agreement type , it is crucial that a comprehensive property co-ownership agreement is established to include clear details on who owns each aspect of the property including money and assets, and the sale of the property. It should also cover insurance arrangements, financial contributions (including taxes, maintenance, etc.), inheritance plans, as well as dispute resolutions, all of which are crucial to avoiding disagreements that could damage personal relationships and lead to litigation. Essentially, a property co-ownership agreement will provide protection for all co-owners by clarifying their rights and responsibilities, potentially saving time and money over the long-term.
The Core Components of Co-Ownership Agreements
Though all co-ownership agreements will be specific to the circumstances and parties involved, certain clauses are essential to ensuring smooth co-ownership. These include provisions regarding title holdings, financial obligations, maintenance responsibilities, and exit strategies.
Representations as to Title: All co-owners should be equally represented on title, or alternatively, the name(s) of the co-owner(s) not represented on title should be referred to in the agreement.
Financial Obligations: This clause should detail the property expenses as well as the manner in which these expenses will be allocated among the owners. Such expenses may include taxes, utilities, insurance, yard, and maintenance.
Maintenance Responsibilities: This clause should outline what constitutes routine maintenance and emergency maintenance and the party responsible for attending to each (alternatively, services may be contracted out for each service type). Additional roles that require delegation would be snow clearing and garbage collection.
Exit Strategies: It is crucial that legal counsel be involved in drafting a co-ownership agreement so as to come up with an amicable solution to an eventual dissolution of the relationship. Explicit exit strategies should be addressed, including how the property will be transferred, allocation of expenses, and the steps to be taken should one party want to buy or sell their interest.
It is also critical that a co-ownership agreement is drafted to protect the rights of any occupiers who may not be on title.
Why Using a Template for Co-Ownership Agreements is Advantageous
For many buyers of co-ownership properties, the best way to ensure conformity with the law and proper coverage for all contingent situations is to have a lawyer prepare a co-ownership agreement. This can also be done in cases when a lawyer is hired to review a template co-ownership agreement that was drafted by another lawyer and supplied by the vendor or the existing condominium developer (more for the protection of those involved with the development than by consumers). However, the consumer needs to understand the importance of the nuances involved in protecting their interests, which are never passive.
For other condo buyers, it is possible to use a custom or semi-custom solution, even a templated one, provided that the ends do justify the means, i.e., it is worth spending time to explore the document, find a level of comfort or list questions to resolve in order to achieve that end.
Templates have a lot of advantages. They should be prepared by someone specialized in the area and familiar with the common issues in those types of arrangements. This specialization results in more time being saved, as the involved parties are mostly able to proceed from a general layout to a near-finished product very quickly.
There are also savings in legal costs: The process will always go faster if the involved parties have agreed on the material terms to be covered, as opposed to a lawyer who needs to seek instructions for each point in the contract.
A good template will also be doing work for you as you get down to the particulars. A template co-ownership agreement that allows corrections is easier than starting from scratch every time.
More and more condo buyers are pooling their resources to buy into a better location or into a more sophisticated investment property. Templates are an excellent way to move fast without fear of getting something completely inappropriate.
The issues will always be case specific. You may not even know what you are missing until you run into trouble. In that case, you will need to review the document carefully or use a lawyer who understands both the merits and the limitations of a templated approach to the drafting of co-ownership agreements.
Customising Your Co-Ownership Agreement
No two property co-ownership arrangements are alike. This means that everyone – or every group of people – needs to have their own tailored property ownership agreement. And so we come full circle back to the co-ownership agreement template: it should not be used as is for any ownership structure, relationship or purpose. It needs to be customized according to the situation .
In terms of customizing a co-ownership agreement template, there are a number of things that need to be considered when deciding how to modify a template. For example: When it comes to customizing a co-ownership agreement, there’s no one-size-fits-all solution, but taking the time to think through how to tailor your template to suit your property ownership situation will go a long way in protecting each party.
Legal Guidance and Expert Help
A very important consideration when using template co-ownership agreements is to ensure that it accurately reflects what the parties to the agreement have discussed, and that all the details are correct. It is also very important to be aware of how the law can affect the terms of the property-whatever the agreement says, the law will ultimately govern particular matters if there is no specific provision in the agreement. In addition, in the unfortunate event that a dispute arises between the property owners, certain provisions of co-ownership law take precedence over whatever the parties have included in the agreement. It is therefore very important to know what these automatic consequences are in order to avoid any surprises later. A further issue is that the parties may wish to make alterations to the standard template agreement to suit their particular situation and so it is always advisable for legal assistance to draft or amend a template co-ownership agreement.
Frequently Asked Questions about Property Co-Ownership Agreements
Q: Do I have legal obligations if I and other co-owners enter a property co-ownership agreement?
A: Unless the parties agree otherwise, each co-owner will have obligations which will be enforceable against him. These obligations are best expressed in formal terms in a legally binding co-ownership agreement. Otherwise the courts will usually consider the law implied the terms of the co-ownership contract.
Q: Can the terms of a co-ownership agreement be changed if all the parties are in agreement?
A: Yes, although the parties may wish to consider entering into a separate deed recording the change in order to ensure the new terms are legally enforceable in the future. For example, if one co-owner loaned his deposits to another, and then their respective share of ownership was varied after the purchase of the property, it may be difficult to show later how much deposit was paid by each . The parties perhaps should have considered preparing a deed of variation of the original co-ownership agreement.
Q: What happens if the parties cannot agree on a matter and yet one party wishes to change the terms of the agreement?
A: The matter may have to be referred to a third party for adjudication. For example under a property dispute act it may be possible for the aggrieved party to go to arbitration. Some sort of mediation may also be considered or parties may be able to refer a dispute to the court for adjudication.
Q: What happens if one of the parties goes bankrupt?
A: In the case of part-owners going bankrupt, the centres of the property will remain in accordance with the agreement, and the trustee of the bankrupt shall sell the bankrupt’s share to the non-bankrupt co-owners. The price should be agreed among the parties, or failing that, by the court.