Co Ownership: How Does It Work?

By: ROS Team

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Buying a property in the US can be challenging, especially if you are relying on one source of income. But that does not mean you cannot, or should not, explore alternatives for homeownership. Perhaps you’ve considered joining forces with a family member or a friend to buy a house. This is a feasible alternative to homeownership that will address the income source issue. This type of arrangement is called property co-ownership; here’s a guide that addresses the concept in more detail.

What Does Co-Ownership Mean in Real Estate?

When there’s co ownership of a home, one or more individuals share property ownership. Each co-owner owns a percentage of the property depending on what’s stipulated in the ownership agreement.

Co-Ownership Mean in Real Estate

Co-Ownership has been around for a long time, and it can take on different forms. For instance, co ownership could mean a married couple owning a property together or several family members who purchase a home together. When one of the owners passes away, the second owner will typically assume the deceased owner’s portion of ownership.

Types of Property Co Ownership

There are different types of property co-ownership. Every kind of co-ownership corresponds to a different set of rules.  The most common options are tenancy in common and tenancy by the entirety.

We’ve provided some additional insight to each below:

1) Tenancy in Common

This type of ownership arrangement occurs when two or more people share ownership. There is no limit to the number of people who can join a tenancy in common. Also, the co-owners may have unequal shares in the property, meaning the amount contributed to buying the property.  For instance, one co-owner may own 60% while two others each own 20%.  The ownership percentage is typically outlined in the deed.

The primary takeaway about tenancy in common is there are no survivorship rights. The property’s shares pass to an heir when a co-owner dies; the decedent’s shares would not be distributed equally to the remaining co-owners. Anyone can enter into a tenancy in a common ownership arrangement, and it’s usually the default co-ownership option in most states.

2) Tenancy by the Entirety

Tenancy by the entirety, on the other hand, has a right of survivorship should one of the co-owners perish. It is perfect for married couples who have joint assets. It also helps them avoid the probate process when one of them passes away because the property would automatically go to the surviving spouse.  Couples are considered one financial entity in a tenancy by the entire structure.

3) Joint Ownership

Joint ownership, which is also called joint tenancy with rights of survivorship, allows tenants to hold equal ownership rights. Everyone would have equal rights, even if one member paid the whole amount for the property. Any individual included on the deed enjoys the benefits of property ownership, and all tenants agree to pass the property onto the other co-owners at their death. Doing so helps members avoid the probate process and court. To utilize and fully enjoy joint ownership, each tenant must have the following:

  • Interest: All of the co-owners must have an equal interest in the property;
  • Time: Ownership interest must begin at the same time for all tenants;
  • Title: Everyone gets the same title in the deed; and
  • Possession: Usage rights and access to property must be the same for every tenant.


Benefits of Co-Ownership

Shared homeownership allows you to buy more expensive properties since you have access to additional financial resources. You may potentially pay a lower down payment as well due to the additional funds available for a down payment. Co-ownerships are also beneficial from the standpoint of shared costs for large expenses like property maintenance and repairs.

Benefits of Co-Ownership

Downside of Co-Ownership

For all its benefits, there is a downside to co-ownership. Co-owners may disagree on things related to the property, such as where to invest money for home improvements.

Real Estate Timeshare Ownership

Timeshare ownership is a co-ownership model that refers to any real estate owned and used by multiple people. The most common example of timeshare ownership is when you buy the right to use a hotel room or a condo unit in a resort community for vacation purposes. It suits those who plan on spending 2-3 weeks a year in the same resort.

Real Estate Fractional Ownership

Another less common co-ownership home model is fractional ownership. This works for people who seek a hybrid second home ownership arrangement or a hotel/resort ownership. In this model, owners buy access to a type of unit at a club or resort, not a home.  They can buy fewer shares than in timeshare ownership. In addition to the share value, they must also pay costly annual membership dues.

Partners vs Co Owners

You might be confused about what constitutes a partnership versus co-ownership. If two people buy a single asset, that is co-ownership. They both have to agree to sell the property as well. Co-owners share the proceeds from selling the property even though the house was not purchased with the intent to earn a profit.

On the other hand, if the property was bought to generate rental income because it’s an investment property, the purchase would be a partnership. Partners can act in the interests of the business, but there is no such agency relationship in co-ownership. In co-ownership, the co-owner does not have to act in the interests of the owned asset, and each co-owner is responsible for their actions.

Read Also: Guide to Buying Property as an LLC

Most Frequently Asked Questions About Co-Ownership

How is Co-Ownership Established?

You can establish a co-ownership in a property title or deed. Additionally, your mortgage paperwork can also help you in this regard. If you haven’t mentioned anything and you are not married to the co-owner, the state will list the property as joint tenancy or a tenancy in common by default.

How Do You Sell a Shared Ownership Property?

It largely depends on the type of co-ownership. Since only married couples can have a tenancy by the entirety, death or divorce dissolves co-ownership. On the other hand, all owners have to agree to dispose of the property for a tenancy in common. Though, most of the time, individuals can sell their shares to exit the property independently.

What is Covered in the Co Ownership Agreement?

Items covered in a co-ownership agreement are as follows:

  • How much is your share of the ownership of the property
  • How the down payment is split
  • What happens when you do not pay your share
  • How the mortgage payments and bills are split
  • House rules you mutually decide
  • What happens if you want to move out or sell your share
  • How the profit or loss will be split at the sale
  • What happens if a co-owner dies

In addition to these general considerations, you can incorporate what is important for you in writing. It is better to set expectations in writing and in advance, so there will be no surprises when a situation arises.

Deciding to co-own a property with somebody is one of the biggest decisions of your life. It is likely to leave a life-changing impact on your quality of life. That’s why it goes in your best interest to consult with a qualified solicitor before making any binding decision.

Can You Take Out a Joint Mortgage with Your Partner, Sibling, or Parent?

Usually, joint mortgages are taken with spouses but that does not mean that you cannot take one out with your family member, friend, or partner (unmarried). Mortgagers allow up to four people to take out a joint mortgage.

The chief advantage of a joint mortgage is that you will be able to purchase a more expensive property by pooling your finances. One potential drawback is that the lender could look to the remaining borrower for all of it if any one of the co-owners disappears or defaults and fails to maintain the mortgage repayments.

What is Probate?

Probate is the legal process that is adopted after someone dies where assets are allocated and debts are paid. The probate process is not required for a co-owned property with survivorship rights as there is nothing left for the court to decide.

Why have a Trust Deed?

It is recommended that you have a Declaration of Trust or Trust Deed if you’ve purchased a tenancy in common. This is a legal document that states who owns what percentage share of the equity, and it can be used to clarify a procedure for one party buying the other one out. It is an important document that makes sure that people will be able to stay in their own homes, even if their relationship ends.

Why have a Will?

While you will always be there to decide what to do with your share in the property when you are alive, the issue may arise when you are no longer alive. In this regard, a will specifies what happens when one or both of you die. It becomes particularly important when your co-owner is not your partner or family member. Leave in the will who you want to inherit your property in the event of your death or the court will pass the property with whoever your next of kin is through the probate process.

Final Takeaways

Property co-ownership is quite common between married couples and business partners. It makes things simpler for people who cannot or don’t want to buy property by themselves. The best thing about co-ownership is that the law allows for an adjustment in shares.  There is also guidance as to who will inherit those assets should one of the owners pass away.