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With high housing prices, more attention is being focused on the concept of co-housing with buyers sharing occupancy and ownership costs of buying a home.
Last month, real estate reporter Tess Kalinowski wrote about a new web-based app — weOwn.ca — designed to match would-be buyers. Co-owners of a home should have a binding agreement that spells out the details of the relationship.
But finding like-minded buyers is only half the story. The other half is setting up a binding agreement to govern the relationship. The most important issues to be considered in entering into a co-housing agreement with partners, whether they are long-term friends, relatives or new acquaintances, are:
When all residents of the house are getting along and agree on everything, a written agreement may not seem necessary. But the main purpose of a co-housing agreement is to provide for resolution for operating issues, and disagreements over management and sale of the house.
Some of the issues to address in a co-housing agreement:
Repairs or improvements. When they’re needed by one owner, are the costs divided equally? If only one owner wants to paint or remodel, does the other owner pay half the cost? The theory here is that any improvement will probably increase the home’s value.
Utilities. Are they divided by the amount of space occupied in the house or the number of occupants? If, for example, half the house is occupied by one person, and the other half by two people, are the utilities shared — equally, or two-thirds/one-third? If the single occupant is joined by a live-in partner, does that affect the cost-sharing of utilities, cable and internet?
Defaults. If one of the co-owners is behind on mortgage and tax payments, how does the other owner recover his or her share of the arrears? Do they sue each other while living together?
Division of expenses and ownership interests. What happens when one partner occupies two bedrooms and the other uses only one? If just one owner has a car, does that partner pay more of the shared common expenses?
Subletting. If one party moves out, can he or she rent the space to strangers?
Ending the agreement. This is always a big issue and partners should consider if there will be a written provision entitling one owner to force a sale — whether or not the other is in default. One common provision is a buy-sell clause. This provides for one partner to set a price on his or her share of the property, and let the other partner decide to buy or sell him or her out at that price.
An experienced lawyer should always be consulted when preparing a co-housing agreement. The goal will be to provide for smooth operation of the property, a fair division of ownership, expenses and responsibilities, and an equitable way of unwinding the venture.
Bob Aaron is a Toronto real estate lawyer and frequent speaker to groups of home buyers and real estate agents.
He can be reached by email at email@example.com, phone 416-364-9366 or fax 416-364-3818.