LEGAL AND CONTRACTS The Basics
Buying a property with a stranger is no different to buying with a friend. Buying a property with someone else can be risky, so it is important that you have an agreement with the other co-buyers and have everything in writing ahead of time. If you are buying with a friend and even though you “like and trust each other” now, things can go sour. Think about all the different things that can make your dream go sour and plan ahead for them with a lawyer. The more you are aware of potential problems the more you can take steps to avoid them and all can benefit from a business agreement. Shared real estate arrangements are at the whim of so many future changes as each individual’s path in life is so different (circumstances, financially, spiritually etc) and subject to the whims of fate. It is important to provide for all future contingencies. Structure the deal in such a way that you value the property commensurate with “cash in” and “proportional ownership.” That is will each of you be putting equal amounts of “cash down?” If you get a mortgage, will each of you be paying “equal shares” of the monthly payment; of the “insurance and taxes?” How will you account for “labour” and “building supply costs” on house improvements. Be very clear as to what the rules will be if one or more of you want to “get-out-of-the-deal.” Co-ownership
The legal relationship between the co-owners will be “tenants-in-common.” Joint ownership in the context of residential property is where more than one person owns a property together. If there is a mortgage then the mortgage will be on the basis of “joint and several liability.” That means that all the parties to the mortgage are jointly and severally liable for repaying all of the mortgage. It is possible to own property as joint tenants or as tenants in common: - Joint tenants - here neither party can sell without the other party’s consent. If one party dies, the other automatically inherits the other’s share and this is ideally suited to married couples or partners buying together who are in a long term relationship.
- Tenants in common on the other hand is where the interest in the land of each tenant in common is separate and distinct from the other. The interest can be in equal shares (eg. It may be 1/3rd for one and 2/3rd for the other. There can be several owners as tenants in common all with different shares. All tenants in common are entitled to physical possession of the whole property. each party can dispose of his share whilst alive or through a will. This type of ownership is more suitable for people buying together where they do not intend to live together as a couple. This means each person owns a share in the same property and they can dispose of their share when they like. The interest of a tenant in common can be left under that person’s will and forms part of their estate. If a tenant in common dies without a will that person’s interest will pass under his estate under the rules of intestacy.
The co-ownership agreement
This is the legally binding agreement entered into by all the co-buyers. It records the intentions and the purposes of the co-buyers. It helps protect the interests of all the co-buyers in the event that relations among the parties begin to sour. It is important that you enter into an agreement with your co-buyers whether you are buying with family, friends or strangers. The agreement sets out clearly the rights and obligations of all the parties and will protect your interests. This agreement will prevent misunderstandings with your co-buyers in the future. Once you register with us we will provide you with a comprehensive co-ownership agreement to suit your situation. Some of the legal issues covered in the agreement will be: - How much equity in the property is owned by each party
- How much does each person pay towards the deposit
- What percentage of the monthly mortgage payments each party contributes
- Should there be a time frame in which no one can sell their share.
- What should be done if one party wants to move out or wants to sell his share?
- If someone wants to sell their share, do the others maintain “right of first refusal” to purchase that share individually or collectively?
- If someone chooses to sell and others do not exercise the right of first refusal what provisions are there for the others to “approve” to whom they sell their share?
- Minor expenses related to the property eg, insurance, repairs, bills etc to be paid out of a shared bank account
The percentage of the mortgage that each person takes on does not have to be related directly to their salary, it is upto the co-owners to decide on how you proportion the mortgage and the repayments between yourselves and once decided this is set out in the agreement. It is also important to make clear how the property will be assessed at any future change in ownership. You should consider a provision in which all the co-owners will agree that you will seek individual real estate assessments and average such to determine a value for the property at any point in the future when a change in ownership status including the death of any given partner occurs. We have a standard co-ownership agreement which we can offer you at a reasonable cost. This agreement is very comprehensive and covers most areas such as how the property ownership is split, what happens if one owner wants to sell his share, what happens if one co-owner loses his job and is unable to pay the mortgage. We can tailor this agreement to suit your individual needs. It can be as simple or as detailed as you wish at an additional cost. If you were to consult a lawyer to draw up an agreement from scratch it would cost you hundreds of dollars. It is upto you as to whether you want to use our agreement or whether you want to consult a solicitor and draft a new agreement. If you need further information please contact us. The co-habitation agreement
This is an agreement drawn up and signed by all the parties who are co-buying. It basically sets out the co-buyers financial responsibility, who owns what, how the household will be run, what the ground rules are, who can sleep over, having or not having pets etc. It is a document that helps everyone understand where they stand from beginning to end. It is better to include as much as possible than leave it out. Conveyancing
Once you have decided on the property you want to purchase, you will need to nominate a firm that will handle the conveyaning for you. We can do the conveyancing for you. Once you have identified a property you would like to purchase, you can contact us and we will handle the conveyancing for you from the time you sign the contract until settlement. We will liaise with your lender and the real estate agent and attend to all the paperwork and attend settlement on your behalf. You will not have to worry about anything. We will answer all your questions and handle the whole application and buying process. No question is too stupid. From the time you sign the contract until settlement, if you have any queries, we are only a phone call away. What is conveyancing?
It is the process by which property is transferred from one person to another. What is the section 32?
A section 32 statement is a document which gives you all the relevant information about the property. Some of the information included in the section 32 is evidence of title, confirmation of rates, zoning details, building permits, notices etc. It is advisable to have a solicitor look at the section 32 before you sign the contract. What checks must I conduct prior to signing the contract?
Prior to signing the contract it is important that you check everything about the property. You must get a building inspection done to ensure that there is no structural damage to the building, make sure that all appliances are in working order, get a pest control inspection done if it is an old property, and measure the land. What is a contract of sale?
Once the offer you have made has been accepted the agent will submit a contract of sale to you. If you satisfied with everything you sign the document which is legally binding. Upon signing the contract you will be required to pay a deposit and the balance monies will be due at settlement which is a mutually agreed date. What next?
After you have signed the contract you must forward all documents to the solicitor who will handle the conveyancing for you until settlement. What is settlement?
It is the day on which all the obligations under the contract are fulfilled, all the documents exchanged and balance monies paid. The certificate of title is then registered. For further information on conveyancing please contact us. Wills
What will happen to your share of the property if you were to pass on. It is important that you protect your share and ensure that it goes to the right person. The personal representatives of the deceased party must deal with their share according to the terms of their Wills or if there is no Will according to the rules of intestacy. We can draw up a will for you to ensure that your wishes are carried out. If you need further information please contact us. Power of Attorney
You have made an investment and it is important that in the event that you are unable to make a decision with regard to your investment in the case of ill health or if you are overseas some one you trust must be able to make the decision for you. This arrangement is recognized by law and has resulted in the formulation of a document called a power of attorney. By this document one person (the donor) gives another person the right to represent the donor in a way recognized by law. The simplest form is a general power of attorney, but ceases to have effect if the donor loses his mental capacity. The donor may appoint one or more attorneys to act in certain circumstances. It must be signed, sealed and delivered.
An enduring power of attorney endures even if the donor loses mental capacity and the attorney is able to continue making decisions on the donor’s behalf. One or more attorneys can be appointed and the document must be signed, sealed and delivered and the signature witnessed.
A medical power of attorney comes into effect only if the donor becomes incompetent.
We can draft a power of attorney for you. For further information please contact us.
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