What You Need to Know when Buying Property With Someone Else

Written by in Investment on December 22, 2014

Buying property with someone else can be an alluring idea. You and your co-buyer may be able to share costs to make the purchase much more affordable. If you are buying as an investment, a desirable property can make a big difference in the anticipated return. For first-time home buyers, a co-buyer may make that important first purchase possible.


But buying with someone else has risks as well. Disputes can arise when a relationship sours, when one or more of the parties suffers a financial reversal or simply wants out of the deal for some other reason. The biggest danger of all is mortgage default, which will damage the credit of all involved.

The common law lens through which property ownership issues are understood can seem a little ancient, dating back to a time when land ownership was the primary way wealth was transferred from one generation to the next. It can also be less than helpful in a modern context, which is why smart co-buyers generally work through these issues prior to a purchase in a contractually binding co-ownership agreement.

Joint Tenancy and Tenancy in Common

 Common law divides the rights and obligations of property ownership into two big categories. Co-buyers are defined as either joint tenants or tenants in common. The most common example of a joint tenancy is where a husband and wife own a house together. Neither one can sell his or her interest in the house independently. When one dies, ownership of the entire house passes to the survivor. Imagine the problems, however, if a couple buys a house intending to marry, but then decides otherwise.

In a tenancy in common, with no agreement to the contrary, either party can sell his or her interest independently. On the death of either party, the deceased’s interest in the property passes to whoever is named in the will or would otherwise inherit. This arrangement also has its drawbacks, as the survivor can end up co-owning the property with a stranger.

If the form of ownership is not clear, courts will default to one alternative or the other, but it varies from one state to the next. In New South Wales, under the Conveyancing Act, the default position is a tenancy in common. In Victoria, on the other hand, the default position is a joint tenancy. Either option can be fraught with difficulties.

Co-Ownership Agreement

 Co-buyers need not settle for either option, but should work with legal counsel to design a co-ownership agreement to suit their needs. This agreement should cover contingencies including:

Decisions to sell or refinance the property,

  • How to set buyout terms,
  • How to split income and costs associated with the property,
  • How to structure mortgage repayments, and
  • How to handle the risk of mortgage default.

Buying a property with someone else has some very attractive advantages, but it takes a bit of forethought to make it work out well for everyone involved.

About Rolf Howard, Managing Partner, Owen Hodge Lawyers

https://www.realestateview.com.au/blog/wp-content/uploads/Rolf-Howard-headshot-32.jpgRolf is managing partner of Owen Hodge Lawyers. He has been in the legal practice since 1986 and a partner of Owen Hodge Lawyers since 1992. Rolf focuses on assisting clients to proactively manage legal responsibilities and opportunities to achieve competitive advantage.