Joint ownership of real estate is a common practice in British Columbia because of its many advantages. However, before agreeing with someone to co-own real estate, it is crucial to understand the dos and don’ts of joint ownership to ensure a harmonious and legally sound arrangement. In this article, we will provide a comprehensive guide to navigating joint ownership in BC.
Understanding Joint Ownership of Real Estate and its Forms
Joint ownership of real estate refers to a situation whereby two or more entities own property such that every decision and responsibility regarding that property will be agreed upon unanimously by all the parties involved. As we said earlier, this form of ownership is very common in British Columbia because of its advantages. For example, it makes it possible to share financial burdens regarding the property among the parties. Also, it increases the chance to pool resources for purchasing real estate.
In British Columbia, two primary forms of joint ownership are recognized: joint tenancy and tenancy in common.
- Joint tenancy is a form of joint ownership that involves equal ownership shares and the right of survivorship. This “right of survivorship” means that if one of the parties that owned the property passes away, their share automatically transfers to the surviving owner(s).
- Tenancy in common, on the other hand, is very different from the former. This form of ownership allows for unequal ownership shares and does not include the right of survivorship. This means that if one owner, unfortunately, passes away, that will be the end of their shares.
Who Can Enter Into a Joint Ownership Agreement?
Now that you have grasped what joint ownership of real estate means, you are probably asking yourself, “Who can I establish joint ownership with?”. Well, to simply answer this, British Columbia law does not impose any restrictions based on the relationship or connection between co-owners. Joint ownership can be established with anyone as long as you trust them and have a reason to own property together. For instance, you can establish joint ownership with your family, friends, business partners, or even unrelated individuals.
The Dos and Don’ts of Joint Ownership of Real Estate
It has to be said that joint ownership agreements are very complicated. Therefore, before you enter into one, you have to take note of some important things.
- Define the ownership interests carefully: Establishing clear ownership interests and the percentage of ownership each party holds is something that you must do before you officially enter into a joint ownership agreement. The importance of doing this is to help prevent future disputes and confusion.
- Prepare a written co-ownership agreement: It is highly recommended to create a legally binding co-ownership agreement that outlines the rights, responsibilities, and expectations of all co-owners. This document should address issues such as property management, maintenance costs, dispute resolution, and potential exit strategies.
- Consult with an attorney: The simple truth is that a joint ownership agreement is very complicated, which is why you must seek advice from legal and financial professionals experienced in real estate matters. They can help you navigate the legal implications of joint ownership and provide guidance on structuring the arrangement in a way that will benefit you.
- Communicate openly and honestly: Another important thing you have to do is establish clear lines of communication between co-owners to address concerns, make decisions collectively, and ensure everyone remains informed about property-related matters.
- Regularly Review and Update the Agreement: Lastly, it is also important to review the joint ownership agreement regularly (it could be done annually or every 2 years). This is important because life is generally unpredictable, and circumstances may change anytime. And so, it is important to review the co-ownership and make the necessary changes.
The Don’ts of Joint Ownership of Real Estate
As with other types of legal agreements, a joint ownership agreement always has a few things that you should dissuade yourself from before you enter into such an agreement. We will look at some of them below.
- Never rely solely on a verbal agreement. When entering joint ownership with a person, you have to dissuade them from formalizing the terms of joint ownership in a verbal agreement. The problem with verbal agreements is that they are not always legally binding because there is no record of them. So, a person can just wake up one day and decide to change their stance regarding an agreement, and there won’t be anything to stop such an individual.
- Never take legal and financial advice from professionals for granted. The simple truth is that, no matter your experience level, you can’t know better than legal and real estate professionals. So, before entering a joint ownership agreement, seek expert guidance and advice first.
- Do not overlook Insurance Coverage: Adequate insurance coverage is essential for joint ownership. Co-owners should obtain insurance policies that protect their interests and consider liability coverage to safeguard against unforeseen events.
- Don’t ignore tax implications: joint ownership can have tax implications for all co-owners. So, to be safe, consult with tax professionals to understand the potential tax consequences and explore tax-saving strategies.
- Don’t assume that everything will be okay. This is one of the biggest mistakes that people make. People tend to assume there won’t be any complications in the joint ownership agreement, so they will fail to insert an exit clause. The reality is that many future scenarios can cause a breakdown in the co-ownership agreement. And that is why the agreement must establish clear exit strategies if one of the co-owners wishes to sell their share or exit the joint ownership arrangement.
Get in Touch With us at Saanichton Law Group.
Joint ownership of real estate in British Columbia offers opportunities for shared investment and ownership. To ensure a successful and harmonious joint ownership arrangement, you must follow the dos and don’ts of the co-ownership agreement. If you plan on establishing a joint ownership agreement with another person and need expert opinions and guidance, don’t hesitate to contact us at Saanichton Law Group today!
