Friends Who Purchase Property Together

 
 
 

HOW IT WORKS & WHAT TO CONSIDER

Linda Toga

THERE ARE LIFELONG FRIENDS, friends with benefits, friends who share the deepest secrets, and then there are the really brave kind—friends willing to co-own a home or apartment.

So if you’re brave (trusting, forgiving and adventurous) enough to embark on joint ownership of a property with a friend, what’s the best way to go about it?

Basically, there are two ways individuals who are not married to each other can take title to property:

First, people can own real property as “tenants-in-common” (TIC). Co-owners who are TIC each own a share of the real property and have the right to sell or transfer their own share to whomever they want, without the consent of the other owners. If you go this route, each of you can own 50/50, or some other breakdown. You need not own equal interests in the property.

For example, if three people own a piece of property as TIC, each may have a one-third interest in the property, or one may have a one-half interest, while the others each have a one-quarter interest. Since the ownership interests may not be the same for each co-owner, it is important that the percentage of the property owned by each TIC is set forth on the deed.

Again, when someone wants out, you and your friend(s) are free to transfer ownership interest in the property to whomever you or they please. The transfer can be done during the life of the co-owner or it can be done through a bequest in a will. Regardless of how the transfer is made, or to whom, the co-owners have no say over who the new TIC may be. For this reason, it’s important for co-owners to consider an agreement that gives them a first option to buy out the interest of a co-owner who wishes to dispose of his TIC interest in the property. As always, be as concerned with getting out of the deal as getting in.

Tenants-in-common also have a responsibility to pay expenses relating to the property in proportion to their ownership interest. If a TIC fails to contribute to the upkeep of the property or the necessary carrying costs, the other co-owner can bring an action to compel the delinquent owner to pay his share. Of course, we hope our friends are more dependable, so a legal option is less necessary here.

A second way in which more than one person may take title to real property is as “joint tenants with right of survivorship.”

As joint tenants, it is assumed that each owner owns the entire property. Unlike a TIC who is free to sell or otherwise transfer her interest to a third party without consent of the other owners, a joint tenant is restrained from doing so. Joint tenants cannot sell the property without the consent and signature of the other joint tenants. In addition, a joint tenant cannot leave his share of the property to someone in a will. That is because the right of survivorship essentially guarantees that the “last person standing” is the sole owner of the entire property. For example, if there are three joint tenants and one dies, the two remaining joint tenants automatically become the sole owners of the entire property.

{Please note: There are variations of these ownership laws in different states. So before engaging in a TIC or joint tenant agreement, be certain to check with a lawyer to better understand your options and obligations}.

Linda M. Toga is the owner of the East Setauket-based Law Offices of Linda M. Toga, P.C. where she focuses on estate planning and administration, as well as litigation and issues involving real estate and small businesses. Linda is a frequent lecturer and the author of LEGALLY SPEAKING which appears monthly in the Times Beacon Record Newspapers. Contact: Linda@LMTogalaw.com

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