Property Co-Ownership – Getting it right from the start

You are looking to purchase a property together and would like to put in place an agreement that covers what happens if things do not work out and either of you wants ‘out’.

Our co-ownership agreement can provide you with a broad number of provisions to govern everything from who pays for household costs to how any future sale price is determined. We can also draft a tailored document for you that reflects any specific circumstances or quirks that are specific to your individual situation.

Common Q&As about entering into a co-ownership agreement

When should we think about setting up one of these agreements?

We recommend that you have identified the property you are purchasing before putting in place the agreement so that we can draft it using information specific to the property. The ideal time to put the document in place is after you have signed the contract for sale but before you settle.

We do not have a specific property or address in mind – is this a problem?

If you would like an agreement prepared as soon as possible, we can also prepare an agreement for you using general terms and you can attach a schedule to the back of the agreement that states which property the agreement refers to once you have identified the property.

How should we hold/purchase the property? Does it matter?

This will depend on what kind of property you are purchasing and what the property will be used for. We can suggest a number of different ways that the property can be held to suit your own circumstances once we know a little bit more about what your goals are and how the property will be funded.

How does this agreement work with a loan from the bank?

Any loan you take out will be reflected in the document if it is known. Otherwise, we draft in general provisions if no loan has been defined. Neither owner will be able to mortgage the property without the consent of the other if both parties are on the title so it is not necessary to have the agreement registered on the title. However, the bank may request to see the agreement prior to you obtaining finance.

We draft comprehensive co-ownership agreements.  Call us now on 1300 654 590, we’d love to help.

We are not going to put in an equal amount – one of us is contributing the majority of the deposit and then we will pay off the mortgage equally. How should we split the profit if there is an ultimate sale of the property?

This will really come down to what is fair in terms of what each of the owners have contributed to the deposit and to the mortgage repayments and other maintenance costs for the property. It is likely that it will just be easiest to adjust for that deposit.

If one party has contributed more or most of the deposit, it may be appropriate for an escalation rate to be applied to the deposit amount that they get back that reflects the return they would have received if they had put that money in the bank or invested in shares.

If you do not want to add an escalation rate, the owner who contributed most to the deposit can get back a nominal amount and then the owners can split the rest of the proceeds of the sale.

Alternatively, each of the owners can share in the upside in proportion to the amount they initially put in. For example, the person who put in 60% of the deposit takes a 60% share of the final sale proceeds.

We want to apply an escalation rate. How should that rate be calculated?

There are a number of ways to do this, ranging from the current CPI to an unsecured lending rate (which can be at a high rate). We recommend the RBA cash rate as your minimum return, because this is about the same as what you would get back if you put the deposit funds into a savings account. Our view that the RBA cash rate is a fair way to acknowledge the fact that one party has initially contributed more than the other.

What if we want to make it fair without having to add an escalation rate?

If one of the owners has put in most or all of the deposit, the other owners can just pay off larger amounts of the mortgage until each party’s contributions are about equal.

We draft comprehensive co-ownership agreements.  Call us now on 1300 654 590, we’d love to help.

If we do go ahead with you, what kind of timeline should we expect? Is the process onerous?

There are a number of steps to take in order to get your agreement tailored to your specific circumstances, but overall, the process is relatively quick and smooth. The usual process is as follows:

You provide us with some basic information to start off the process, such as your personal details, what kind of property you are purchasing and what you are trying to achieve. This can be done via email or via our form at;

  • We book in a time to chat with you about the information you have provided us and to ensure that a co-ownership agreement is right for you;
  • If the agreement is right for you, we ask you further questions that are specific to completing the agreement and discuss how you would like to deal with issues, such as one owner exiting or dealing with tenancy. You can also raise any issues you feel may come up in relation to your specific scenario;
  • Once you have answered our more specific questions, we draft a tailored document that captures your personal circumstances and the terms you and the other owner(s) have agreed upon. We send that draft to you and book in another time to discuss the draft and any changes you would like made;
  • We re-draft the document if necessary and once it is at an advanced draft stage, send it to you again for your review and approval;
  • Once you have approved the final draft, the agreement is complete and ready to be signed by you and the other owner(s).

In all, we expect that the process will take about 2-3 weeks from when we first receive your instructions to finalising the draft agreement ready to be executed.

That sounds great! How do we get started?

Contact us to book in a time to speak with us about putting in place a tailored agreement that fits your circumstances.

If you have any questions, or would like to discuss these matters further, please contact us on 1300 654 590.

Our Great Lawyer Guarantee

We want to be part of your team over the long term. We'll achieve this by sticking closely to the following principles:

  • We'll listen carefully to understand what you want to achieve. Then we'll thoroughly explain our advice and step you through the documents. You can be sure you'll know the full consequences.
  • Our lawyers work as a team, so someone will always be available to answer your questions, or point you in the right direction. You will also benefit from a range of perspectives and experience.
  • One of our key goals is to pass on as much knowledge as we can, so you can make your own informed decisions. We want to make you truly independent.
  • We only do what we're good at. You can be confident that we know what we're doing and won't pass on the cost of our learning.
  • For advice and documents, we provide a fixed or capped quote so you don’t take price risk. If you're in a dispute, we'll map out the process and costs so you know what to expect.
  • We're not in this game for our egos. We're in it for a front row seat to witness your success.

We measure our success on how efficiently we have facilitated your objectives, enhanced your relationships, and reduced the level of stress for all involved.

If we sound like people you can work with, call us now on 1300 654 590 and speak directly with a great lawyer.

Call 1300 654 590 and speak with a lawyer today

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