The risks of property co-ownership with your partner

Written by in Buying

In response to rising property prices and the overall cost of living, more people are taking advantage of the increased flexibility and borrowing power of a joint ownership (also known as property co-ownership) arrangement to secure their dream home.

While the benefits of joint property ownership between two or more people are clear to see, namely because you can:

  • Pool all your finances and assets together to afford a more valuable property than if you were to purchase on your own.
  • Save up for a high enough deposit to reduce the amount of interest on mortgage repayments, and even reduce or eliminate the need to pay Lenders Mortgage Insurance (LMI).
  • Split up the financial responsibilities – i.e. repairs and maintenance, council rates, insurance – to reduce ongoing costs and maintain your current lifestyle.
  • Still take advantage of federal and state government schemes like the First Home Owners Grant, First Home Saver Accounts, and exemptions to stamp duty.

… it’s wise to be aware of the potential pitfalls though. Doing so could save a lot of stress, money, and heartache, not to mention streamline the journey and result in a positive return on your investment.

Risks of property co-ownership

The risks of property co-ownership are very real. While there is less risk of going into such an arrangement with an established partner – compared to a friend or stranger – it still pays to be on the same page and know how to tackle the challenges that lie ahead.

Some of the most common risks of property co-ownership include:

  • One owner wants to sell the property when the other doesn’t
  • One owner isn’t paying their fair share of ongoing expenses, leading to increased tension and financial burden on the other owner
  • Both owners don’t see eye-to-eye in regards to their goals and outcomes
  • The relationship ends and results in a downfall in the co-ownership arrangement
  • If one co-owner leaves the arrangement, the other owner has the difficult task of finding a new buyer to partner up with.

Fortunately, it’s easy to overcome these challenges when you set up a rock-solid plan. Here’s how you can do just that.

Tips to a successful joint property ownership

To get the most out of your property investment and stay on great terms with your partner, follow these valuable tips.

Be on the Same Page

What do you both want out of the arrangement? How will you fairly divide up the upfront and ongoing costs? Can both of you afford it? And what roles and responsibilities will you both assume to ensure the journey is smooth sailing? 

If there is any source of conflict in the terms of your arrangement, they’ll stick out like a sore thumb rather quickly.

That’s why it’s so important to be upfront with each other straight away. Communicate openly with each other, listen to what the other person has to say, and come to a compromise on any conflicting issues either of you may have. This way, you can feel confident knowing you’re both on the same page.

You should also have in place an Exit Strategy if something was to go wrong. For example, if one person suddenly became seriously ill, or if they lost their job and could no longer afford to pay the ongoing costs. As a result you’ll both be prepared for the worst and know exactly how to respond to the situation.

From there, you’ll have a solid framework to put the agreement in writing…

Get independent legal advice

Property co-ownership is a complex area of law. You need to be aware of the different types of joint ownership structures. Along with exactly how they work, the kind of legal implications they possess, and whether or not they’re the right choice for you. 

You also need to have a clear, easy to understand, and legally binding co-ownership agreement put in writing. This way, you’ll solidify the terms of the agreement and avoid the risk of potential disputes later on.

These are just some of the many ways a solicitor can make your life a lot easier. Not only will they remove any uncertainty you may have, but also give you peace of mind knowing the arrangement is legally binding and suitable based on your circumstances. 

Once your solicitor has solidified the agreement in writing, there’s one more thing to keep in mind…

Maintain Regular Communication

No one ever wants to question the strength of their relationship. But it must be said. Partnership arrangements can put even the strongest relationships to the test. 

For this reason, it’s important to maintain regular communication with your partner and address any issues you may have early, before they escalate. Emotions can run incredibly high when money is involved. And, when this is combined with the complexities of a long-term relationship, some people struggle to talk straight business when they partner up with their significant other.

Don’t forget. You can always consult your friendly solicitor for ongoing advice and support. They can advise you on any new laws or regulations that may affect your circumstances. Plus, they can offer expert advice – from the perspective of a neutral, third-party – to help you overcome any challenges you may face along the way.

Overall, by planning ahead for the future and maintaining regular communication with your partner, your co-ownership agreement is far more likely to deliver lasting results.