CO-OWNING A HOME IN ONTARIO: AN ALTERNATIVE SOLUTION FOR MODERN BUYERS

Co-Ownership

As housing prices continue to rise across the Greater Toronto Area, a growing number of Canadians are turning to co ownership as a creative and practical way to enter the real estate market. Co-ownership, also known as co-buying, is reshaping the way we view traditional home-ownership by allowing multiple individuals (family members, friends, or strangers) to pool their resources and share property ownership. But what does it entail, and is it right for you?

What is co-ownership?

Co-ownership is a financial arrangement in which two or more individuals share ownership of a single residential property. Each co-owner shares the responsibilities for the mortgage, property taxes, and maintenance. This arrangement includes the legal rights to live in the home or unit and eventually sell the property, as well as arrange financing through a co-ownership mortgage.

Co-ownership mortgages

A co-ownership mortgage allows two or more individuals to pool resources and share the financial responsibility of purchasing a home. There are important aspects to know about a co-ownership mortgage, such as:

  • Co-owners will need to share information on their income, assets, debt, and credit history to obtain a co-ownership mortgage.
  • All co-owners are jointly responsible for making the mortgage payments, property taxes, and other home-related expenses.
  • Lenders assess the combined income and credit scores of all co-owners, potentially allowing for a larger mortgage than an individual might qualify for on their own.
  • In the event of missed payments or defaults, all co-owners are equally affected, which could impact their credit scores.
  • Costs to be considered include the down payment, mortgage payments, renovation costs, ongoing maintenance costs, property insurance, utilities and property taxes.

Legalities of co-ownership

Ideally, co-owners will work with a real estate professional who will help them through the buying and selling process. If you are buying a house that has already been divided into separate units, ensure that the units were created legally and comply with zoning, building, and any other applicable requirements.

The legal structure of co-ownership typically falls into one of two categories:

  1. Joint Tenancy: Each owner has an equal share of the property. If one owner dies, their share automatically transfers to the surviving owner(s). This arrangement is typical for spouses or close family members.
  2. Tenants in Common: Owners can hold equal or unequal shares (e.g. 60/40). Each owner’s share can be sold, willed, or transferred independently of the others. This arrangement is better suited for friends or non-family arrangements.

Regardless of the structure, legal professionals strongly recommend drafting a co-ownership agreement to prevent misunderstandings and protect the interests of all parties involved. The co-ownership agreement should include a buy-out clause, allowing one owner to purchase the other’s share at fair market value. Alternatively, the group may agree to sell the entire property and divide the proceeds. It’s also wise to include terms for refinancing, property valuation, and timelines for exit to avoid disputes.

Pros and cons of co-ownership

A co-ownership arrangement can be complicated, so consider these pros and cons while making your decision.

PROS

  • Affordability: Splitting down payments and mortgage costs makes ownership more accessible.
  • Shared Expenses: Utilities, maintenance, and property taxes are divided.
  • Equity Building: Unlike renting, co-buying allows you to build wealth.
  • Community Living: Ideal for individuals seeking companionship or a shared lifestyle.

CONS

  • Legal Complexity: Requires detailed agreements and legal advice.
  • Potential Conflicts: Disagreements over finances or lifestyle can strain relationships.
  • Limited Flexibility: Selling your share may be more complex than selling a solo-owned home.
  • Credit Risk: If one co-owner defaults on payments, others may be liable.

Co-ownership offers an alternative way of navigating a competitive housing market, but it may not be suitable for everyone. A successful outcome depends on trust, clear communication, and solid legal planning. If you’re considering this route, consult a real estate lawyer and financial advisor to ensure your arrangement is secure and sustainable.

By Julie Achtermeier