Earlier this month, about two dozen Torontonians came together in a speed-dating type of event in search of a home ownership partner. These are people who may have sizeable down payments but, in today’s hot Toronto housing market, can’t make a go of it alone. What they each need is someone willing to share a roof with them without necessarily sharing a life.
Shared ownership is becoming more prevalent as people explore creative solutions to home ownership. But it comes with complicated legal, financial and emotional decisions.
Before seriously starting down this road, each party should obtain their own legal counsel to help them navigate the process since this is much more than a standard real estate deal. Next, the two parties need to sit down and have a proper conversation about their needs, wants and expectations — all of them. This is not the time to be shy and afraid of offending another person; matters left out of discussion now could become contentious issues later.
First consider both of your lifestyles. Are either of you married or have children? If not, do either of you hope to because bringing a partner and/or children into the arrangement could affect the other person’s lifestyle. Do you both plan to live in the home or will one of you be using it as a rental property? A leased property creates a different dynamic between the two parties as well. What about noise complaints? Don’t forget to discuss a plan for if one person gets sick and can no longer work or if one person suddenly finds themselves unemployed. Then, consider day-to- day life. How will snow removal or lawn care be handled? Who will do it? What about if a pipe bursts or repairs and maintenance are needed? Who will pay for it? Will there be shared laundry and if there’s only one parking spot, who gets it?
Finally, consider how you will break up, as an exit strategy is as important as the signatures on the purchase agreement. Are you financially matched going into the deal? If not, how will that affect the eventual sale of the property? If one person wants to sell but the other wants to stay, will there be a buy-out option? If one person wants to renovate their unit, do you share the costs or does that affect how you split the potential sale price?
In a shared ownership arrangement, there’s so much that can go right but there’s also so much that can go wrong. With your lawyer, draft a legal agreement that includes everything you’ve discussed and more.
While you can’t anticipate every scenario, drafting and signing a legal document that outlines the complex financial and legal matters that will or may arise is far more cost effective at the onset of the relationship than dealing with issues after they’ve become a problem.
