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Breaking into the expensive B.C. real estate market is proving increasingly out of reach for many Canadians due to the rising cost of property in the province. In order to purchase an investment property in B.C. in a more affordable manner, many are choosing to purchase property together with a family member, friend, or other business partners. A practice commonly referred to as co-ownership. When creating a co-ownership agreement, one of the most important things you must decide is what kind of land title you will hold as co-owners of the property.
When deciding which type of land title to hold on co-owned property, the nature of your relationship with your co-owner will likely be the most important factor to consider. The type of land title will not affect your purchase or management of the property significantly, but it will dictate how the asset is to be distributed if you or your co-owner were to die. Each co-ownership has unique circumstances, and the owners should each consider how the land title will affect their personal estate plans. Let’s take a look at the differences between the two land titles, and which co-ownership circumstances they are best suited to.
Joint tenancy is the presumed title for most land purchases involving two people, who are most often spouses, however, there can be more than two owners on the property. Joint tenancy grants each owner an equal share of the property, and the shares cannot be divided into smaller portions or unequal percentages between the owners. One of the primary benefits of joint tenancy is that when one owner dies, the surviving owner automatically becomes the owner of all shares in the property. In terms of estate planning, this has many benefits. The automatic transfer of the deceased owner’s shares to their co-owner means that widowed spouses do not have to wait for estate administration to be complete before they are considered the sole owner of the property. This can help grant some ease and peace of mind to grieving spouses facing a very difficult time in their lives. The other benefit of this automatic transfer is that the shares of the house do not need to be included in the co-owners’ wills, meaning that the asset will not be included in the probate process. In B.C, probate fees are roughly 1.4% of the total value of all probate assets in the estate. For most people in British Columbia, their homes are the most valuable asset they own, so keeping the family house out of probate can save most estates thousands of dollars at a minimum. Saving this money can also mean that you have extra cash to pass onto your heirs.
Unlike joint tenancy, tenants in common are able to divide the property into shares of varying sizes. If a co-owner were to die, their share in the property would fall into their estate to be distributed according to their will, rather than into the hands of their co-owners. Especially in cases of co-ownership of an investment property with friends or business partners, it’s important to carefully consider who you choose to inherit your share in the property. It is a good idea to discuss your succession plans for your shares with your co-owners to avoid uncomfortable situations for your beneficiary and business partner(s). The succession of shares in the co-owned property should also be discussed in your co-ownership agreement to ensure a smooth transfer of the assets for all interested parties when the time comes.
In the end, the type of land title that is best for your co-ownership will depend on your unique circumstances. Co-ownership agreements should be tailored to the unique needs of both the asset and its owners. If you’re looking to make an investment purchase with one or more other investors, or are considering buying a house jointly with a spouse or partner, contact an experienced lawyer today to prepare you and your partners to protect your rights over the asset.
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