Co-ownership agreement
A co-ownership agreement regulates the rights and obligations between two or more parties who jointly own an asset.
Such agreements are frequently used where two parties, who are not married, own real property together. For example, it may concern a family holiday home shared by three siblings; an apartment purchased jointly by a brother and sister for their mother; or unrelated parties who jointly acquire a rental property, a holiday home in Tuscany, or a yacht.
A co-ownership agreement is also often essential when unmarried partners purchase a home together – usually in combination with a will.
In short, a co-ownership agreement (also referred to as a shareholders’ or owners’ agreement) is a written contract that regulates all matters on which the parties may later disagree.
While a co-ownership agreement can cover a wide range of issues, it will always include provisions on what is to happen if and when the co-ownership is terminated: how the joint ownership is to be dissolved, how the asset is to be sold, whether the parties have pre-emption rights in respect of one another’s shares, etc.
A co-ownership agreement is particularly useful where the parties contribute different amounts (which need not necessarily affect the ownership shares), or where they hold differing rights and obligations in relation to the jointly owned asset.
It may also regulate matters such as rights of use, property maintenance, allocation of expenses, and the rights of the co-owners in the event of the death of one of them – among other issues.
It is, of course, usually easier to agree on the terms of joint ownership when the parties are on good terms. However, even absent any disputes, one risks a situation where a co-owner unexpectedly passes away, leaving the surviving owner in joint ownership with the deceased’s spouse, heirs, or even a bankruptcy estate.
The terms of a co-ownership agreement should therefore be considered carefully. Reliance on a standard-form contract, or on the assumption that the other party will “act reasonably,” is not advisable. Co-ownership agreements should be tailored by professionals to the specific circumstances. They are rarely costly – but a registered (tinglyst) co-ownership agreement can prove to be extremely valuable, and it is nearly impossible to predict when the need for it may arise.