Joint property ownership is often considered by unmarried couples who wish to live together. It’s important to establish a joint property ownership agreement before purchasing a home to define joint property responsibilities. Joint property ownership agreements set legal parameters for division of assets and resolution of the property in the event the owners decide to go their separate ways or one passes away.
How is joint property ownership structured?
There are two ways to set up your joint property and it’s important to understand how each structure affects your responsibilities as a property owner.
- Tenancy in common: Under this structure each owner retains separate and distinct shares of the property, which are not necessarily equal. This may be a good option if both owners cannot make equal contributions to the property. When dissolving tenancy in common, the owners must obtain a partition of the property, which divides the property in question into distinct lots. At this point an owner can choose to sell their portion of the property or leave it to their heirs. You could also choose to sell the entire property and split the proceeds accordingly. You may choose to create a partition of property in your joint property ownership agreement at the beginning of residency in order to avoid legal problems down the road.
- Joint Tenancy: This joint property agreement is also called “tenancy with the right of survivorship” and co-owners have an equal share of the property. In the event one owner survives the other, the survivor automatically obtains the deceased’s interest in the property. You cannot leave property contracted for joint tenancy to your heirs unless you are the sole surviving owner or you specify otherwise in your joint property ownership agreement.
Can I make improvements on joint property?
As a joint property owner, you have unrestricted access to the entire property. Therefore, it’s a good idea to include a plan to handle the cost of mutual repairs or improvements in your joint property ownership agreement. Otherwise, you can’t legally force your co-owner to contribute to home improvements you want to make and you alone are responsible for any dip in property value that occurs as a result of renovations. It’s in the best interest of both buyers to create a system for repairs so co-owners who don’t pitch in cannot reap the profits of those improvements.
What are my joint property responsibilities?
Each joint property owner is responsible for their share of the mortgage payment, property taxes and homeowners insurance. If one does not pay, the other co-owner could offer to buy the property from them or request they sell it. It’s important to note that the bank can still foreclose on a property whether or not it is owned jointly.
Obtain pre-approval for financing your joint property before signing an agreement
The first thing to decide is how much each owner can afford to contribute to a mortgage payment. Joint property owners who aren’t married may need to apply separately for home financing, but may both need approval in order to buy the home. Obtain a mortgage pre-approval to ensure you each have the funding you need to purchase the home before signing a joint property ownership agreement.
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