Dear David,

We are building a new house and thinking of adding a secondary unit for one of our children and their family to live in. What complications should we prepare for if they own part of the home? – IN THIS TOGETHER

DEAR TOGETHER: Co-owning a home with family can be a wonderful arrangement, but it comes with legal, financial, and relational implications. The key to success is open communication and clear agreements from the start. Before making any commitments, sit down as a family to discuss expectations, responsibilities, and long-term plans. A well-structured conversation now can help avoid conflicts later.

You will need to decide how ownership of the home will be structured and who will be on title. Will it be joint ownership (equal shares) or different percentages? What percentage of the home will each party own? (e.g. 50/50, 70/30). What happens if one party wants to sell or refinance in the future? Clarifying these details now can prevent legal and financial headaches later.

Home ownership comes with ongoing costs. Make sure you agree on who is responsible for mortgage payments, and how those payments will be split. Decide whether the cost of property taxes and insurance will be shared equally, or divided according to ownership percentage. How will expenses like hydro, water, gas, and repairs be divided, and if upgrades are needed in the future, who pays?

When living this close to family, setting clear boundaries is crucial. Discuss shared vs. private spaces: will the laundry room, the backyard, driveway, or storage be shared? Are there quiet hours or guest policies? Establishing household rules for parking, pets, and other expectations will help ensure you’re on the same page while helping to protect everyone’s privacy and comfort.

Be aware that a shared property can have tax consequences. Consult an accountant to understand the tax implications of this arrangement, and to structure ownership as efficiently as possible. If one party sells their share, consider how capital gains tax may apply. Also think about what happens if one of the families involved can no longer afford their share of the home, or if someone passes away. Life circumstances change, and it’s essential to plan for different scenarios. Having a clear buyout or exit strategy can help prevent uncertainty in the future.

PRO TIP: Discuss these points and write everything down. Your real estate lawyer and your accountant can help draft a formal co-ownership agreement that outlines each person’s responsibilities. Setting clear expectations from the start will pave the way for a successful, long-term co-ownership arrangement that benefits everyone involved. #Advice #AskDavid #TheNegotiator

David is a top-selling Broker in Kitchener-Waterloo Region. He works personally with you when selling or buying your home. Moving? Get it right. Ask David today! Call or text 519-577-1212.