In today's competitive west coast real estate market, many solo young adults and students are having difficulty getting the funds for a down payment on a home, forcing them to rent or otherwise settle for less. Sometimes parents won't or can't assist their children with co-signs or payments. Sometimes those in casual relationships don't like the idea of sharing property value with someone they might not be together with in a few years.

Whatever the reason, more and more people are considering co-buying with good friends or family members. Unlike co-operatives, where buyers purchase shares in a corporation that owns the building, co-ownership lets buyers purchase a percentage of the property title and become "owners in common" of the same home.

What Are The Benefits To Home Buying With A Friend?

Co-buying real estate with someone else has a number of obvious benefits: the main one being the ability to enter the real estate market much sooner than you would be on your own. You'll be able to collaborate on a larger down payment and qualify for more mortgages as co-borrowers.

Co-owning can also make the process of managing a home easier and more affordable. Costs and responsibilities for upgrades, maintenance, and managing the property as an investment are all shared, spreading out the financial burden. If you're co-owning a condo, strata responsibilities can also be shared.

But just as in any business venture or legal partnership, there are some risks to consider before deciding on it.

Understand Your Relation To Your Buying Partner(s)

When purchasing a home as a co-owner, it's important to know the difference between joint tenancy and tenants in common.

Joint tenancy is most commonly seen between spouses who purchase a home together. When a property is held in joint tenancy, it automatically passes to the next surviving tenant whenever one tenant dies. Only the last surviving member in a joint tenancy can pass the property on to someone else via their Will; tenants who pass away first will have zero rights to the property, and so will their descendants.

Tenants-in-common are different. In this case, the property is split into fractions among the tenants (or owners), and those shares stick with them. Each tenant can sell or Will their fraction of the property so long as it falls within the rules of any co-ownership agreements.

In BC, default provincial law states that "land owned by two or more persons is presumed to be owned by them as tenants-in-common" unless you have a title explicitly stating joint tenancy. (ref. Beacon Law Centre) However, assets purchased for the home under two names (such as household goods, vehicles, and other investments) are assumed to be owned as joint tenants.

You'll also want to keep an eye on your living arrangements and division of property. The CRA identifies any two people "in a marriage-like relationship for at least 12 months in a row" as a common-law couple. In addition to this, a ruling in BC 4 years ago (known as the FLA or Family Law Act) determined that common-law couples who have lived together for two years or more automatically have the same rights and responsibilities as married couples when it comes to taxes, debts, and assets.

What defines a "marriage-like relationship" is determined by the Supreme Court, and sometimes co-owners (and co-renters) have been incorrectly flagged as common-law by the CRA. Some living arrangements that may get your relationship automatically flagged include:

• Cohabitating with a child
• Co-owning with a member of the opposite sex (though same-sex pairs may also be flagged)
• Living with your co-owner without any long periods apart
• Sharing bank accounts, RRSPs, credit cards, or other investments with your co-owner
• Sharing a bedroom with your co-owner
• Eating meals with your co-owner
• Shared household item purchases, utilities bills, and household expenses

This doesn't mean that any one of these living arrangements will automatically get you labelled as common-law by the CRA, but it might be best to play it safe by making sure you and your co-owner have separate bedrooms and distinct living arrangements.

Draw Up A Co-Ownership Agreement

Because of the important nature and large amount of funds involved in co-owning a property, most co-ownership arrangements take place between close family members or relatives. However, this trend is changing, with more and more close friends entering into co-ownership together, and even talk of "real estate dating sites" where strangers can reach out to find a co-buying partner. It's become so common that Vancouver Credit Union Vancity has created a checklist of items to consider before deciding to enter into a co-ownership agreement with someone you're not related to.

Despite the many benefits of sharing a property and splitting the costs, virtually all experts recommend that if you aren't married or common-law with your home buying partner, you should have a detailed written agreement drawn up, anticipating the different scenarios you might face in a home owning partnership. Because buyers share a single mortgage and one tax bill for the property, co-owners will usually be more bound to the terms of these custom legal contracts than by any legislative provisions. Making these difficult decisions and discussions early helps prevent legal disputes from occurring further down the line. If a dispute arises and you don't have a written agreement in place, the subsequent legal costs could wind up outstripping the value of the property itself (not to mention the harm that might be done to your relationship with your co-buyer).

When entering into a co-buying agreement, it's best to treat it like a business deal. The expectations of everyone involved should be discussed and documented with professional legal counsel. You'll want to cover all contingencies: from break ups, to getting fired from jobs, to acts of nature. Address how the property will be divided if someone dies or leaves the partnership. Determine who can buy out what and when, and at what percentage, under which circumstances. Cover how to share the purchase price, anticipated operating costs, unanticipated costs, and future renovations.

Make sure that all co-owning parties are listed on the property title. Pay extra attention to any unbalanced agreements — for example, if you're paying 100% of the down payment, but your co-owner will be splitting expenses with you. You'll also want to take a look at ownership and transference: Can one co-owner force another to sell? Does a co-owner need the consent of all other co-owners before they can transfer their interest in the property? Will property rights be passed to future or current children of the co-owners? What steps need to be taken to end the relationship and value the property?

It might sound like a lot, but it's important to keeping a stable and maintainable arrangement. You can help things run smoothly by keeping plenty of documentation: hang onto any invoices for amounts you spend on the property and disclose them to your co-owners as soon as possible. Deal quickly with any issues, and keep a record of correspondence whenever possible, preferably by email. Many lawyers report disputes arising from poor communication between owners more often than actual problems with the property.

Finally, it's important to note that when purchasing a house as a co-owner, you will likely be listed as a co-borrower on your mortgage plan. Unlike co-signers and guarantors, mortgage co-borrowers qualify together and are expected to occupy the property together. Some mortgage lenders, like Vancity, have developed or are developing mortgage plans specifically aimed at buyers entering into a co-ownership agreement to purchase a home. These plans often allow for the mortgage to be split into parts so that co-owners can opt for separate rates (for example fixed and variable), and payments can come from separate accounts.

A co-owners agreement doesn't guarantee no problems will happen down the line, but they can sometimes save your relationship with your co-owners, or at the very least make sure that any problems that do occur are handled as quickly and cost-effectively as possible.