Multiple Owners: Multiplying Your Practice’s Services and Clients’ Satisfaction
Not unlike our recent blog story about multi-generational homeowners, there’s a growing trend towards co-ownership between young friends, investors or in some cases, strangers. Mind, they’re not all Gen Zs or Millennials trying break into the market. Some people are even buying vacation properties together.
Unsurprisingly, the trend’s growing fastest in Vancouver and Toronto where homes are proportionately so much more expensive than, say, 30 or 40 years. And it’s only accelerated since July 1, 2020, when the Canada Mortgage and Housing Corp (CMHC) made it harder to qualify for a CMHC-backed loan.
What makes a co-owned home? Two or more names on the property title.
Co-owners may or may not contribute equally to the down payment. However, the amount they contribute would usually determine what percentage of the home they legally own.
Having multiple co-owners means greater buying power. Which in many cases also means:
a) entry into the market,
b) the security that ownership entails, and
c) growing equity in their investment/home.
More buying power means access to more neighbourhoods. So, maybe two young families can have separate units in their multi-story house and share the yard and more in a home neither could afford solo. Plus, as the above implies, co-ownership can build community. Perhaps the parents share child-minding duties to save on daycare. Maybe they take turns mowing the lawn.
Again, it’s not just youth. Maybe some seniors co-own a big home with their own bedrooms or units, but share costs, cooking duties, the garden, dining and living rooms. The combinations and arrangements are as varied and complicated as people.
But all those new buyers depend on your guidance. Let’s look closer at the big and small differences between multi-partner ownership and traditional married with mortgagors.
Unlike the established practice of Joint Tenancy, co-ownership demands Tenancy in Common.
Not only do co-owners bring their percentage of the down payment with them, they also come with their debts. So, all the purchasers’ credit scores e blended, which can affect their mortgaging power.
Moreover, this isn’t your parents’ mortgage where, when one spouse dies the other inherits full ownership. Tenancy in Common entitles co-owners to their percentage of the home but lacks that right of survivorship.
Instead, each partner’s percentage can be traded and passed on. Which means?
Maybe not so far down the road, one co-owner could end up living with someone they hadn’t expected. Or if they’re a minority owner, the now majority owner(s) may wish to sell the property. They’ll need wise legal counsel before signing.
The co-ownership trend is accompanied by innovative new financing models.
Canada has always excelled in real estate innovation. Take the new app that two Canadian entrepreneurs developed called Husmates. It acts like a dating platform for strangers who are serious about sharing a mortgage on a property they couldn’t afford alone. Would-be co-owners sign up, create a profile by answering a series of questions. Then the app hopes to match them and “the perfect partner or group of people to co-own property with.”1 Like a dating app, it even asks if the user wants to meet the match offered. Then they choose whether to take the next step.
OurBoro is another example of Canadian innovation. OurBoro “invests up to $250,000 to pitch in on a 20% down payment for prospective homeowners, providing a shared ownership structure for buyers interested in co-ownership but not interested in sharing the property with others.”2 When the co-owner sells the house, the company takes the percentage of the profits that their investment made towards the down payment. Clever!
All of which are reasons why they’ll need solid legal guidance more than ever.
Consider everything that co-owners will have to agree about up front. There’s the home decision-making process (there will be disagreements; best anticipate how to solve them) to the care and maintenance of the property to the use of home by guests or new residents when one co-owner enters a relationship. The possibilities are endless.
Such financing innovations build a co-owned house of cards. Your clients will need you to handhold and lead them further than in the past. No matter how complicated the contracts and no matter where the next market evolutions leads, who is your best partner to get your conveyancing deals done? Look no further than our name, LawyerDoneDeal!
1. From husmates.com/how-it-works
2. From Streets of Toronto, by Zakiya Kassam and Julia Mastroianni