High real estate prices are inspiring more creative buying arrangements between even casual acquaintances - but it's important to proceed carefully.
With Toronto’s high housing prices, more attention is being focused on the concept of co-housing with buyers sharing occupancy and ownership costs of buying a home.
Earlier this year, Star real estate reporter Tess Kalinowski wrote about a new web-based app — weOwn.ca — designed to match would-be buyers.
But finding like-minded buyers is only half the story. The other half is setting up a binding agreement to govern the relationship.
The most important issues to be considered in entering into a co-housing agreement with partners, whether they are long-term friends, relatives or new acquaintances, are:
- the initial financing and deposit structure;
- the ownership percentages to be shown on title;
- the operation and management of the venture, including a process to resolve disputes;
- an exit strategy where all parties agree to the sale of the property; and
- an exit strategy where one of the parties is in default or where the parties cannot agree on the sale of the property.
Some of the issues to address in a co-housing agreement:
Repairs or improvements. When they’re needed by one owner, are the costs divided equally? If only one owner wants to paint or remodel, does the other owner pay half the cost? The theory here is that any improvement will probably increase the home’s value.
Utilities. Are they divided by the amount of space occupied in the house or the number of occupants? If, for example, half the house is occupied by one person, and the other half by two people, are the utilities shared — equally, or two-thirds/one-third? If the single occupant is joined by a live-in partner, does that affect the cost-sharing of utilities, cable and internet?
Defaults. If one of the co-owners is behind on mortgage and tax payments, how does the other owner recover his or her share of the arrears? Do they sue each other while living together?
Division of expenses and ownership interests. What happens when one partner occupies two bedrooms and the other uses only one? If just one owner has a car, does that partner pay more of the shared common expenses?
Subletting. If one party moves out, can he or she rent the space to strangers?
Ending the agreement. This is always a big issue and partners should consider if there will be a written provision entitling one owner to force a sale — whether or not the other is in default. One common provision is a buy-sell clause. This provides for one partner to set a price on his or her share of the property, and let the other partner decide to buy or sell him or her out at that price.
An experienced lawyer should always be consulted when preparing a co-housing agreement. The goal will be to provide for smooth operation of the property, a fair division of ownership, expenses and responsibilities, and an equitable way of unwinding the venture.
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