When you purchase a home with a family member, friend or partner you should ensure that the documents you sign and how the title is registered reflect the discussions you have had. When you fail to do so it could lead to a rift in your relationship, costly litigation and emotional stress. Healthy relationships, preserving your money and ensuring peace of mind are important goals and there are three steps you can take to achieve these goals.
Step 1. Discuss what you both understand about your rights and responsibilities.
Some people say that there is no need to discuss their rights and responsibilities regarding their home ownership because they trust each other, but if you really do then, have a discussion and ensure that you are both on the same page. This discussion should include questions such as: how will you share the down payment, the mortgage payments, utilities, taxes, cost of upkeep and home improvements. What would happen if one person wants to move out? Do they receive their share of the investment and share the loss or increase in value? If one person dies does their estate receive the share that person owned? Can either person invite a friend or family member to live in the house or rent out their half of the house to a stranger? There are many other questions to consider depending on your circumstances.
Step 2. Prepare a written agreement.
A verbal understanding is a contract and is enforceable in Court however, do both parties have the same understanding? The best way to determine that is to write it down and have both parties confirm the terms of the agreement. If it is not reduced to writing there is potential for misunderstanding, and disappointment. The written contract could be as simple as an exchange of emails, or it can take many other forms. Between partners, it could be written in a cohabitation agreement and between family members and friends, it can be documented in a co-ownership agreement. In the future, if there is a misunderstanding, the written contract will clarify the terms of the agreement and if the parties interpret the contract differently, a Court determines the terms by reading the agreement and deducing their intentions.
Step 3. Land Titles registration.
When you purchase a home, your ownership is recorded at the Alberta Land Titles registry and a Certificate of Title is issued. This is a public record showing the registered owners and mortgages or encumbrances that are registered on the Title. Two or more people can be registered owners as “Joint Tenants” or as “Tenants in Common”. If Title is owned as Joint Tenants and one person dies then the survivor receives the entire ownership of the property. If Title is owned as “Tenants in Common” and one person dies then the deceased’s estate will still own the a one half interest in the home. The parties can also register their co-ownership agreement on the title and if one of the parties advances more money for the down payment they could register a mortgage on the title to protect their extra investment.
When you buy a home with a partner, friend or family member it is wise to obtain legal advice to ensure that your relationships will remain healthy and that you will have peace of mind.
Prepared April 10. 2022
Sid. J. Kobewka, BA, LL.B, LL.M (ADR) Lawyer & Mediator