Tenants in common
The soaring price of real estate makes getting into the property market hard. The possibility of pooling resources with friends and family to achieve this is appealing.
The question is…How?
The answer could be to become ‘tenants in common’.
Tenants in common is a type of joint ownership of property. This type of co ownership is most suited to investment type properties where each ‘tenant in common’ is able to deal with their interest individually. It is vital to all involved that the purchase is documented and regulated by a tenants in common or co-ownership agreement which can outline every aspect of the purchase.
There can be as many individuals as you like holding a share of the title to a single piece of real estate. The shares in this type of agreement do not have to be equal meaning you can have multiple ‘owners’ with varying shares in the property. These shares are generally decided at the time of purchase, but can be altered at any time, provide all parties agree to the change.
Each shareholder is able to leave their share of ownership in their will to anyone they choose and the other tenants in common have no legal claim to it. Each tenant in common has the right to deal with their share of the property separate from the others. The share of a tenant in common is known as an “undivided” share.
An initial outlay or ‘capital’ is needed and then an amont (stated in the agreement) is paid into a ‘revolving’ fund on a pre determined schedule (ie, weekly, fortnightly,monthly). This fund covers all expenses incurred by the property and if these exceed available funds then each party must put in extra money.
What if I want to sell my share?
After an amount of time set out in the agreement, a party can sell their shares. They can be sold to anyone but must be offered to the other parties in the agreement first (known as the ‘first right of refusal’). If the sale is accepted then the selling party will be responsible for the cost of valuation and all of the other costs incurred.
These are the basics of becoming ‘tenants in common’. The finer details are all covered in your ‘tenants in common’ agreement.
It is a viable and sound way to enter the property market without having to find all the money yourself. Just do it right at the beginning and you can be on the property market ladder sooner than you might think.As long as you have made a ‘Tenants in Common’ agreement and all parties have signed and agreed then there can be no arguments in the future.
