Ownership Agreement Real by gailfan9112

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									Co-ownership of Real Property
Issues to Consider
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If you are thinking of buying a property and owning it jointly with another person, there are several issues you will
need to consider.

Methods of ownership - There are different methods by which you can share ownership of real property. The two
main methods of ownership are called “joint ownership” and “ownership in common”.

Joint ownership – This method of ownership is the one chosen by the majority of married or unmarried couples.
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However, it can be used in other situations as well.

Under this method of ownership, when one person dies, any property owned jointly by that person with another
person will pass automatically to the survivor and will not form part of the estate of the first person to die. The terms
of that person’s will are irrelevant in determining what happens to the property.

However, the terms of the will of the last person to die will be relevant in determining what happens to the
property. The last person to die will be free to change the terms of his or her will at any time, and so there is no
guarantee that the property will be inherited in the way that may have been planned at the start.

If this method is used, the conveyance will state that you the owners own the property “for themselves, the survivor
of them and the heirs of that survivor”.

Ownership
? in common – This method of ownership is often used in situations where a property is shared between
friends, relations or business colleagues – ie not just by a married or unmarried couple. However, a married or
unmarried couple can consider owning property in this way as well.

Where property is owned under this method of ownership, each owner will own “undivided shares” in the
property. When one owner dies, his or her shares in the property will form part of his or her estate and will not
necessarily pass to the surviving person.

The surviving owner can be protected to a certain extent by each owner making a will in favour of the other.
However, this protection is not absolute, since it is possible for the first person to die to revoke a will at any time
before death.

It is possible nonetheless to provide more secure protection to the surviving person by granting each other a right of
life enjoyment over the property until the death of the last of you to die. In other words, the surviving person will
share ownership of the property with whoever inherits from the first person to die, but will not have to share
occupation. However, if the surviving person ever wishes to sell the property, he or she will need to negotiate with
the heirs of the first person to die and obtain their agreement. This could be distressing for the surviving person.

The “amount” of each owner’s share: Where one purchaser is contributing more than the other towards the
purchase price, it is important to bear in mind that, unless specific agreement is reached between the owners and
recorded in writing in the conveyance of the property, on a sale of the property each owner will be entitled to an
equal share of the net proceeds. In other words each owner will have an equal entitlement to the net sale proceeds,
regardless of what his or her contributions to the purchase price and loan repayments are.

It is possible for an agreement to be prepared recording the way in which the owners would like the net sale
proceeds to be divided between them in the event of a sale of the property. This agreement is normally contained in
the conveyance of the property.


You should bear in mind that the effectiveness of any such agreement is limited. Where the purchasers are an
unmarried couple the agreement will be effective for as long as they remain unmarried. Where they are a married
couple (or if they marry in the future) and they subsequently separate or divorce, the court has a discretion to
override any agreements made regarding ownership of property.


Disagreements between co-owners – possible dangers

Where one owner wants to sell the property but other the owner does not want to, problems can arise. This is very
relevant to situations where a property is shared by people who are not a married or unmarried couple – eg where
ownership is shared between friends, relations or business colleagues. Unless the owner not wanting to sell can
afford to buy the shares of the owner wanting to sell, the property will (in most circumstances) have to be sold. This
can cause problems for the owner not wanting to sell. The other problem is that where an owner wants to sell but
the other does not, the courses of action available to the person wanting to sell are:

• To sell his or her own interest in the property to the other owners or to outsiders. It is unlikely that an outsider will
(normally) be interested in purchasing that person’s interest in the property; or

• to require the whole property to be sold. Where the other owner does not cooperate, the only course of action
available is to apply to the court for the property to be sold. This can be time-consuming and expensive. In most
circumstances the court will order the sale of the property. Circumstances where the court might not order a sale is
where the property is capable of division (“partage”) between the different owners and in many cases this is not a
practical possibility

If you have any questions about sharing ownership of a property with someone else, please do not hesitate to
contact a member of our conveyancing department.



RIDER

This paper is intended as a general review and aide memoire. It does not create a retainer or lawyer-client
relationship and does not provide comprehensive or specific legal advice concerning the matters contained within
it. This paper should not be relied upon as giving or providing advice on any individual case.




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