Your legal agreement is an essential part of the co-ownership real estate purchase. It may feel daunting or uncomfortable to discuss certain aspects of your living arrangement through the lens of a legal agreement, but we believe that in most cases, it is better to have it and not need it, than to need it and not have it. Your Legal Agreement is in place to protect you and your group, both individually and collectively.
You can include many commitments and scenarios into your Legal Agreement. What’s important is that your arrangement is clear, contingencies and changes are discussed, and their outcomes are agreed upon.
Every purchasing group is different, so please see the advice of a lawyer to ensure that you have the best agreement for your group.
What’s Important in this step:
Learning why a legal agreement is highly recommended when co-purchasing property
Differentiating between joint tenants and tenants-in-common
Deciding what should be included in your Legal Agreement
Why Is It Highly Recommended You Have A Co-Ownership Legal Agreement?
A legal agreement between owners of a home is there to provide assurance and guidance around remedies. Simply put: it is what the owners agree will happen if Decisions or Agreements made by the members of a purchasing group are not, or cannot, be honored. Without an appropriate legal agreement in place, there are scenarios in which a purchasing group in a cooperative real estate arrangement could lose control of their home or end up in disputes among the group that are not resolvable.
Consider this example:
A group of 4 purchasers, all senior women, live together in a 4-bedroom home. One of them dies suddenly. Her share of the home passes to her daughter, who decides to rent it to a stranger.
Because they do not have a proper legal agreement, the remaining group members lose control over who lives in their home.
Consider this example:
Two married couples purchase a home as a group. One of the two couples decides to divorce. One member of the couple would like to remain in the home as part of the group, but the shares of the home are considered a joint asset and must be liquidated. The strain and unanticipated legal fees result in all parties abandoning the agreement and selling the home.
Legal agreements for co-ownership of real estate can be created to prevent these situations from arising. They are customized contracts that accommodate the wishes of all members of the purchasing group, and outline what will happen in future scenarios.
Read the next section on the different types of legal arrangements and which we think are best for a co-ownership real estate purchase.
How Do You Create Your Legal Agreement?
Click on the sections below to learn more.
What are all the Steps to Becoming a Co-owner?
Click on the links below for all the blog articles related to each step.
“Before looking at homes, I always ask that groups become familiar with ‘tenants-in-common’ law or have had a discussion about how to handle fractional ownership if one partner changes.”
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