Thinking about buying property with your friends or family?

For many young adults, it is difficult to afford to buy a condo or house in Vancouver without some financial help. Some people have generous parents who are willing to assist with the down payment. For the rest of us, we have to consider other options when it comes time to choosing when, where and what you can afford to buy.

One option that is becoming increasingly popular is buying a place with a friend or family member. The big advantage is this option often allows people to pool their resources together, which not only increases the down payment, but also could potentially increase your buying power.

However, there are some risks with this option. For instance, the recent case of Dhaliwal v. Ollek, 2012 BCCA 86 is an example of a cautionary tale where proper planning could have averted the litigation that ensued between the parties.

In Dhaliwal, the plaintiff bought an investment property in Surrey, B.C. with his brother in-law and sister in-law. The property was registered in the in-laws names. A year after the purchase, the plaintiff’s spouse died and he subsequently told his in-laws that he was going to remarry. This news caused a rift in the family. The in-laws proceeded to deny the plaintiff’s contribution and ownership interest in the property. In the absence of a written co-ownership agreement, the plaintiff and defendants had to engage in years of costly litigation to settle their dispute. Unfortunately, cases like Dhaliwal are all too common.

Whether you are considering buying a place with a friend or family member to live in or as an investment, it is always a good idea to work out all the arrangements between the potential owners. Proper planning during the early stages can often mitigate potential problems in the future.

A co-ownership agreement can be a good planning tool as it sets out everyone’s contributions and expectations going into the co-ownership. Most agreements will have terms that deal with the maintenance, repairs and renovations to the property. In addition, the agreement should also discuss how important decisions will be determined when it comes to selling or renovating the property. It is a good idea to engage your legal advisor as early as possible to guide you through the preparation of a co-ownership agreement.

Given that buying a property is a big investment, it is important that you enter into your co-ownership fully informed and well prepared.