Home Buying as a Partnership

Thinking of Home Buying as a Partnership?

There are good reasons to consider home buying as a partnership:

• Income for qualifying to buy in the neighbourhood, home size and amentiies, and land space around the home may not be sufficient;
• Down payment assembly could be accelarated with a pooling of resources
• A strong credit rating of one partner may increase the chance of mortgage approval

Generally, most partnerships involve family members, where a parent or more established sibling is taking the lead role in the purchase.  Similarily, a couple may consider the merits of forming a formal and documented partnership for the home purchase.  This includes platonic, common-law and married couples.    

But, partnerships have been formed with people of the same work environment.  Each has had an opportunity to see the work ethic and ability to get along of the other, within a work environment.

This is also true of people attending the same church or within a community, where each has seen value in the other.

Independent Legal Advice should be sought by all parties of the partnership.

There are additional things to consider before entering a partnership, that should be put into a contract before the title and mortgage are signed:

DEATH

• How is the title to be registered?   There are differences as to how a deceased interest in property is handled, depending on if the title is registered as joint, or as tenants-in-common. 
• If registered as tenants-in-common, where there are estate of the deceased to consider, is there a way to deal with buying out the estate's interest?   What happens if the remaining partners are not able to buy out the estate?
• Could life insurance be a way to structure a simple buy-out strategy?

DEFAULT

• What happens if one of the partners is unable or unwilling to pay their contractual share of the mortgage, property tax, and other agreed split of home expenses?
• What happens if the partner runs away from their contractual agreement?
• What happens if one partner goes bankrupt?

DIVISION

• What happens if one partner decides the relationship does not work?  Who buys whom out? How is the buy out price established?
• What happens if one partner wishes to sell their interest in the home, while the other partner(s) wishes to stay? How will the price and payment be established.

D'TAXES

• In some cases, not all partners will live in the property.  This is especially true of parents being on title with their children.  Is there a way to ensure the parents do not have a tax liability, especially if they have provided cash towards the down payment?

Seeking professional legal advice involves a cost.  However, if you and your partner are able to have an advance discussion and agree to the terms you want to see, it may save hours of consulting fees with the lawyer.