According to the media this scenario happens quite a bit - young people can’t afford a house on their own, and friends or relatives are ending up buying a house together. This sure is a way around the lack of affordable housing, but what happens when there is a dispute?

Let’s think about this for a moment - we have a house with more than one owner, and in case the owners decide they want to go their separate ways, how do they split the house? Fifty-fifty? Sixty-Forty? Seventy-Thirty?

Even in cases when there are 2 owners and they are a married couple, things aren’t simple. I have the same amount of patience for legal matters as the next girl, but these things need to be read once, remembered and acted upon correctly - or your financial future and that of your loved ones can suffer.

As someone who isn’t qualified to dispense legal advice, I will just bring the issues up and then leave it up to you to think about them and decide that you’re either not interested because it’s not going to happen to you anyway - or to be better safe than sorry and ask your solicitor or conveyancer.

Let’s begin with the benefits of co-owning a house, or reasons to do this in the first place.
Buying a house with a friend (or even friends) allows you to pool money together to put a deposit down, your borrowing capacity grows, you pay only a share of purchasing costs (building / pest inspection, legal fees, stamp duty), you can split the costs of owning (council rates, maintenance costs, etc).

And now let’s talk about the ways of co-owning. Basically there are 2 ways of owning a property together with someone else: tenancy in common and joint tenancy. These boring legal terms may sound similar but there are differences and if you’re not careful, these differences can cost you a lot of money.

Tenancy in common

Tenancy in common allows you to specify the proportion of the house that you own. For example, if 3 friends buy a house together and each brings a different amount of money to the table, this can be translated into them owning a different share of a house.

This is best demonstrated by an example:
Andrew, Ian and Casey bought a house together. Andrew contributed 50K, Ian contributed 100K and Casey contributed 150K. We will note in the transfer of land that Andrew’s share is 1/6, Ian’s share is 2/6 and Casey’s share is 3/6. This way transfer of land notes a fair share for every co-owner.

A good thing about tenancy in common is that each tenant has a total control over their share if property. They can sell it, they can get a loan against it, transfer it to anyone, etc.

In my next post I will explain about joint tenancy, and then compare the two and their consequences for the co-owners. Stay tuned!

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