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What You Need To Know About Property Co-Ownership

By Sandy Naidu | August 23, 2008

Types Of Property Co-Ownership

Property Co-Ownership is when two or more parties buy a property together. There are two types of Co-Ownership:

1. Joint Tenants: The owners have an equal ownership of the property. The owners cannot act on their share of property independently (example: both have to sell together - one cannot sell independently of the other). This type of ownership is most commonly exercised by married couple.

2. Tenants In Common: Each owner of the property has a pre-defined share of the property. Each owner can act independently of each other (example: one might opt to sell his share while the other owner still hold on to his share). The percentage of ownership is determined by the percentage of contribution by the individual shareholders. If one contributes 60% and the other 40% then the former owns 60% of the property and the later owns 40% of the property.

Reasons For ‘Tenants In Common’

The following are the main reasons why people might opt for ‘Tenants In Common’ type of agreement:

Rising Property Rises:

For a lot of young people, owning a property has become unaffordable - thanks to the rising property prices and the increase in cost of living. And hence owning a property with a friend or a relative is becoming an attractive option for many people.

If you are in a ‘high law suit risk’ profession then you might opt for this type of ownership with your partner - you might chose to go for a lower share of the property.

Importance Of An Agreement

When you opt for ‘Tenants In Common’ type of ownership, a verbal agrement is not enough. There is no legal requirement for any specific type of document. But it is advisable that all parties involved, seek professional help and sign a well documented agreement. This agreement is called ‘Co-Ownership Agreement’.

Some of the aspects the agreement will cover are:

1. what happens if one decides to sell out
2. mortgage repyament obligations
3. what happens if one party defaults on mortgage repayments
4. how expenses will be split
5. property management details

So if you are considering an ‘Tenants In Common’ type of ownership, please make sure you have a co-ownership agreement in place. Lately in Australia, this type of ownership has been on a rise (property prices being the main reaon behind it).