Buying a property in a co-ownership agreement with a loved one, spouse, or business partner is a means for many to get into the property market. That property can be used as a primary residence, a business location or as a rental property and both owners can enjoy the benefits of it. Things change, however, and there are many reasons that one owner can no longer own the property. They could have passed away, they might want to emigrate, the relationship could have turned sour, or they might simply want to downsize their portfolio. Regardless of the reason, property ownership is a legal commitment and various laws dictate what happens to a co-owned property. These laws can differ greatly depending on the reason as to why one owner exits the agreement. Let’s have a look at some of the most prevalent situations.
The relationship between co-owners
The relationship between co-owners can often influence how the co-ownership came about and what needs to happen to the property when one owner passes away or wants out. In any co-ownership situation, the best practice is to always have a detailed contract set up when the property is purchased and to have this contract include what is to happen when:
- An owner passes away (and he/she is not a spouse)
- A spouse married in community of property passes away
- An owner wishes to sell
- The owners wish to part ways (whether it be a business relationship that breaks down, a divorce, etc)
When an owner passes away
When an owner, who was not a spouse, passes away, one would wish that the contract and the co-owner’s will stipulated what is to happen with the property. Half of the property will be placed in the deceased estate and the condition of the deceased estate, for example, the individual’s debt, can influence what happens. When a business partner passes away and you had a business succession plan and legal agreements, chances are that they would stipulate whether or not the surviving partner receives the share upon payment to the estate. The agreement and the deceased partner’s will could stipulate whether a family member inherits half of the property. Regardless of who receives the deceased individual’s shares, you will need to transfer the property.
A spouse married in community of property
In this instance, you also own the property half-half. The entire property would go into the deceased estate and the estate needs the be processed, debts paid, and all other matters relating to it dealt with. If the deceased estate’s debt, for which the surviving spouse can also be held accountable, is of such a nature that assets need to be sold to settle it, the property could be in danger of being sold. If this is not the case, the deceased individual could have his/her surviving spouse inherit half of the property in which case the entire property will need to be transferred to the surviving spouse as sole owner, and you might need to re-qualify for the bond on the property. If the beneficiary is another family member, half the property will go to him/her.
The one owner wishes to sell
If the one owner wishes to sell and the other does not, it could be stipulated what is to happen in the contract. Usually, the other owner would have the first option the buy the 50% of the shares that do not currently belong to him/her. If both are satisfied with the selling price, it could be a simple transfer of the property ownership. It could happen that an agreement cannot be reached in which case the property could be sold as a whole and both owners receive their share. The now previous owner could decide to buy the property again as a sole owner or find a new partner.
If the owners wish to part ways
This can be very similar to the situation above and it often happens the property as a whole is sold with each owner receiving his/her share, or the one owner buys out the other.
Co-owning a property is a bit more complicated than sole ownership. Our best advice would be to have a clear and nuanced contract that cover all reasonable eventualities concerning the death or departure of one owner. It avoids any unnecessary complications and confusion. If you need any assistance with the conveyancing of a co-owned property or the legal matters concerning the deceased estate of a co-owner, don’t hesitate to get in touch with the AED Attorneys. We understand that the loss of a loved one, the administration of a deceased estate, and the transfer of property can often all be part of the same traumatic event. Our single team of dedicated experts will take away the worry and stress when they handle it all.
AED Attorneys understands that every situation is unique, and although they strive to ensure that the information contained herein is accurate at the time of publishing, it cannot be guaranteed to be without errors or omissions. As a result, AED Attorneys, its employees, independent contractors, associates or third parties will under no circumstances accept liability or be held liable for any innocent or negligent actions or omissions in this article, which may result in any harm or liability flowing from the use of or the inability to use the information provided.