Are family, friends the key to home ownership?

In fact, it’s becoming the norm, with more and more friends and family members pooling resources to jointly purchase and share the ownership of property.

Does this mean we’re diluting the great Australian dream of home ownership, or is this a more convenient, cheaper way to enter the property market?

• Tips for trouble-free loans to family members
• 13 questions to ask when buying a home
• How to protect your online assets after you die

When it comes to property prices, young people are feeling the squeeze and many baby boomer parents are recognising that their children are fast being priced out of the market, and are willing to help.

Co-ownership can have many benefits

The main benefits include:

• You can share the entry costs such as a deposit, stamp duty and legal fees
• You can pool your resources to share ongoing expenses such as rates, taxes and maintenance
• You may even have the ability to increase your borrowing and repayment capacity

However, no large purchasing decision comes without risks, and it’s important for people entering in to the property market, even with family members, protect themselves with a co-ownership agreement.

A written agreement between buyers is crucial to protect the interests of all parties involved.

For example, it’s quite possible that one of the owners will want to sell, can’t cover the mortgage, or simply want out of the contract. Or there’s a dispute between parents and children or friends.

That’s why it’s important to consider all of the potential scenarios up front and have mechanisms for one or both of the parties exiting the contract written in to it. It’s also important that contracts provides for a change in circumstances.

What’s in a co-ownership agreement?

A co-ownership agreement should accurately reflect each party’s rights, obligations and contributions. It’s also important that mediation and dispute resolution mechanisms are provided for, in the event that a disagreement arises among the co-owners.

It should also include …

Buying a property is a huge commitment that can be complicated if you have an unconventional arrangement.

Take some time at the beginning and consider all your options when purchasing with friends and family, particularly the benefits of a co-ownership agreement. If you’re in doubt, seek advice from a conveyancing or property lawyer.

While it’s great that young people are taking innovative steps to get in the market, it’s important they are protected if circumstances stance.

This content was written by Slater and Gordon. For more information, click the logo below: