Buying property with family & friends

Property co-ownership offers an increasingly popular way to get into the property market that allows you to drastically reduce the costs of buying a home and building equity. Whenever a person wants to buy a home, commercial lot or other piece of real estate, they might want to do so as a member of a group of like-minded investors.

There are many ways of going about doing this, with the buying as Tenants in Common one of the most often faced. A form of co-ownership, tenancy in common is a term used to describe how the property is owned andwhich party is responsible for what.

What is property co-ownership?

Property co-ownership refers to an agreement between two or more people to share the ownership of a property. When entering an Agreement between Tenants in Common, each party agrees to certain responsibilities in return for the exclusive right to use the property at certain times. It involves:

  • Combining your money with others to put a deposit down on a property;
  • Combining your borrowing power with that of your family/friends
  • The chance to pay money towards your own mortgage and to build equity instead of paying rent (for Owner Occupiers), or earning an income as a property investor
  • The option to move out of the property and to use it as an investment property, or to sell out if you decide to end the co-ownership agreement

Legal Aspects

Co-ownership is legally referred to as ‘tenancy in common’, which in Australia’s property law allows two or more people to own a property together. A Co-ownership Agreement outlines the rights and obligations of the co-owners or as they are known, ‘tenants in common’. Tenants in common can have an equal or different share in the ownership of a property, with equal or different obligations under the agreement. A co-ownership agreement is a legally binding document that sets out the parameters and details of the co-ownership, allowing each party to fully understand the terms of the deal regarding mortgage repayments, percentage of ownership and exit strategies (that is, if one of the co-owners decides to sell out).

What is the difference between Tenants in Common and Joint Tenants?

The biggest difference between joint tenants and tenants in common is the manner in which the property rights continue in the event of a death of one of the co-owners. In a Joint Tenancy, when a co-owner dies their share of the property passes to the other owners. In a tenancy in common, the share of the deceased co-owner will pass along to according to their last will and testament, or if they die without one, according to the rules of the state. The Agreements Between Tenants in Common will usually state the co-owners have the exclusive right to decide how their share will be passed on after they die.