Housing co-ownership questions
January 13, 2018 4:25 PM Subscribe
My dad and I are thinking of purchasing a house together as co-owners. What are we not thinking about that we should be?
He wants to scale back in a year or two, buy a country property and just keep a small place in the city for when he has to be here for business. I want to take advantage of an insurance settlement which should be cleared up by then to finally get a place I can stay in and invest in. Housing here is expensive so having two of us going in together would mean we each could get a nicer place than we would otherwise.
The idea would be to get a house that could fairly easily be divided into two separate apartments. We read about a family that did this and had an agreement that if one of them wanted to leave and the other didn’t, the leaver would rent out their unit so the other could stay. I could see there needing to be a provision for such a situation. I’m not sure what else we are failing to think about.
Some other details:
- My dad has four other kids. He indicated that his solution for this would be to pay less upfront than me and then pay more of the running costs. That would give me some extra money to over time buy out the portion of his share which would not be covered by whatever my ‘inheritance’ from him was going to be.
- My stepmother is 13 years younger than my dad. If he predeceases her and she does or does not want to stay in the house, I suppose we should have a special provision for that. If I have already bought him out by that point, I suppose she could stay as my tenant renting the second apartment? Or if I haven’t finished buying him out...then she can rent her half the same way she would if she wanted to leave for any other reason?
- If we sign a legal agreement stating that at X dollars I have bought them out, and then the house appreciates in value, will I have problems with my siblings later on over inheritances and so forth? Can this be headed off with a properly done agreement?
This is still in the speculation stage. The backup plan if it falls through would be to each buy our own separate, but smaller, places. And I’m okay with that if that’s the right thing. I’m just trying to get a sense of what the options are and if there is a reason why this might be a really bad idea.
He wants to scale back in a year or two, buy a country property and just keep a small place in the city for when he has to be here for business. I want to take advantage of an insurance settlement which should be cleared up by then to finally get a place I can stay in and invest in. Housing here is expensive so having two of us going in together would mean we each could get a nicer place than we would otherwise.
The idea would be to get a house that could fairly easily be divided into two separate apartments. We read about a family that did this and had an agreement that if one of them wanted to leave and the other didn’t, the leaver would rent out their unit so the other could stay. I could see there needing to be a provision for such a situation. I’m not sure what else we are failing to think about.
Some other details:
- My dad has four other kids. He indicated that his solution for this would be to pay less upfront than me and then pay more of the running costs. That would give me some extra money to over time buy out the portion of his share which would not be covered by whatever my ‘inheritance’ from him was going to be.
- My stepmother is 13 years younger than my dad. If he predeceases her and she does or does not want to stay in the house, I suppose we should have a special provision for that. If I have already bought him out by that point, I suppose she could stay as my tenant renting the second apartment? Or if I haven’t finished buying him out...then she can rent her half the same way she would if she wanted to leave for any other reason?
- If we sign a legal agreement stating that at X dollars I have bought them out, and then the house appreciates in value, will I have problems with my siblings later on over inheritances and so forth? Can this be headed off with a properly done agreement?
This is still in the speculation stage. The backup plan if it falls through would be to each buy our own separate, but smaller, places. And I’m okay with that if that’s the right thing. I’m just trying to get a sense of what the options are and if there is a reason why this might be a really bad idea.
In my neck of the woods, there are two co-tenancy structures. One, Joint Tenants, is what most couples do. Essentially, each partner owns 50%, and should one partner die, the other automatically and inalienably inherits the deceased's share. The other type is called Tenants in Common. Each owner can own a percentage - ie: one can own 40%, the other 60% etc. Tenants in Common can will their share to any one they like. The one mortgage covers all shares but most lenders will separate the loan if one member plans to borrow more than the other. With Tenants in Common, it is also good to have a legal Agreement as to conditions regarding sale, leasing, shared maintenance costs etc. Here's an example of a Tenants in Common agreement between family members for investment purposes.
Check out what similar ownership structures exist in your jurisdiction and then chase up similar templates and information from real estate law.
How do I know this stuff? I'm planning my own co-ownership agreement with a friend.
posted by Thella at 4:58 PM on January 13, 2018 [1 favorite]
Check out what similar ownership structures exist in your jurisdiction and then chase up similar templates and information from real estate law.
How do I know this stuff? I'm planning my own co-ownership agreement with a friend.
posted by Thella at 4:58 PM on January 13, 2018 [1 favorite]
Where are you located exactly? You will need to consult your zoning laws.
In Boston there are plenty of homes that were single family back in the day that add converted to condos. Part of doing this is rezoning, if you buy a house zoned for multi family use then you are set.
Once it's liveable, draw up a homeowner association for shared spaces and master insurance and what your association fee is and what it contributes to. While this may seem silly with just you and your dad, you will thank yourself later if a unit gets rented. Typically homeowners association fees are a monthly sum that pay for master water/sewer,the building's exterior upkeep, electric for shared entryways, the roof and basement as well as future renovations. You will also want to include rules in there about things like trash storage, etc. Again, this may seem excessive but will save you drama later. In this you can include a clause about buy-outs and rules around 100% ownership. This would be specific to your building and it would require a real estate attorney and ensuring federal (not just state) laws are being followed. This is for starters. Definitely consult your local housing division website, there is so much useful information. You will also want to set up a bank account for the homeowner association fees.
posted by floweredfish at 5:16 PM on January 13, 2018
In Boston there are plenty of homes that were single family back in the day that add converted to condos. Part of doing this is rezoning, if you buy a house zoned for multi family use then you are set.
Once it's liveable, draw up a homeowner association for shared spaces and master insurance and what your association fee is and what it contributes to. While this may seem silly with just you and your dad, you will thank yourself later if a unit gets rented. Typically homeowners association fees are a monthly sum that pay for master water/sewer,the building's exterior upkeep, electric for shared entryways, the roof and basement as well as future renovations. You will also want to include rules in there about things like trash storage, etc. Again, this may seem excessive but will save you drama later. In this you can include a clause about buy-outs and rules around 100% ownership. This would be specific to your building and it would require a real estate attorney and ensuring federal (not just state) laws are being followed. This is for starters. Definitely consult your local housing division website, there is so much useful information. You will also want to set up a bank account for the homeowner association fees.
posted by floweredfish at 5:16 PM on January 13, 2018
Lawyer, lawyer, lawyer. I can’t give details online, but I’m in a legal nightmare over owning property with an older relative I’m not married to. You need someone who can look at this dispassionately and think of all the possibilities. If you memail me, I’ll share specifics.
posted by FencingGal at 6:31 PM on January 13, 2018 [5 favorites]
posted by FencingGal at 6:31 PM on January 13, 2018 [5 favorites]
This seems like the sort of thing a lawyer with good real estate and trust and estates experience could structure. I wouldn't do it without a lawyer documenting it because too much could go wrong with the stepmother or other relatives trying to make claims on the property or benefits.
posted by Mid at 7:03 PM on January 13, 2018 [2 favorites]
posted by Mid at 7:03 PM on January 13, 2018 [2 favorites]
This sounds like a legal mess setting up with your step mom if your dad dies before her. Definitely get a lawyer.
posted by gatorae at 7:48 PM on January 13, 2018 [2 favorites]
posted by gatorae at 7:48 PM on January 13, 2018 [2 favorites]
Please please please consult an experienced lawyer. I don't know what jurisdiction you are in, but in mine, you need to set this up extremely carefully and considering all possible contingencies.
posted by lookoutbelow at 9:25 PM on January 13, 2018 [2 favorites]
posted by lookoutbelow at 9:25 PM on January 13, 2018 [2 favorites]
One specific. Don’t just think about possible death of your father. Think about dementia or other mental disability. If someone else is making decisions for him and that person is antagonistic to you, it doesn’t matter how great he is or what he wanted. Or you may be able to defend what he wanted, but you’ll spend thousands on lawyers to do so.
posted by FencingGal at 7:10 AM on January 14, 2018 [1 favorite]
posted by FencingGal at 7:10 AM on January 14, 2018 [1 favorite]
One more thing. Lawyer should specialize in real estate. Not all lawyers will admit it when they’re out of their depth.
posted by FencingGal at 8:35 AM on January 14, 2018
posted by FencingGal at 8:35 AM on January 14, 2018
These are questions for a real estate lawyer and the answers really do depend on where you live.
posted by St. Alia of the Bunnies at 11:31 AM on January 14, 2018
posted by St. Alia of the Bunnies at 11:31 AM on January 14, 2018
Oh, and that said, if you do decide to buy together, having that lawyer draw up papers specific to YOUR deal will be worth whatever they charge.
posted by St. Alia of the Bunnies at 11:32 AM on January 14, 2018
posted by St. Alia of the Bunnies at 11:32 AM on January 14, 2018
Agreed with the above-- lawyer this now to save a lot of hard and expensive lawyering later, and don't get into this without knowing all the ways you might get out of it, by choice or not.
You can die too, you know, and that'll leave your dad holding the bag, and he needs to be ready for that possibility. Something (or someone) may drive a wedge between you two, or you or he may suddenly find yourself in a financial need and need to liquidate the house against the wishes of the other. You already know how right this can go, but you really need to consider how wrong this can go, and prepare.
posted by Sunburnt at 2:04 PM on January 14, 2018
You can die too, you know, and that'll leave your dad holding the bag, and he needs to be ready for that possibility. Something (or someone) may drive a wedge between you two, or you or he may suddenly find yourself in a financial need and need to liquidate the house against the wishes of the other. You already know how right this can go, but you really need to consider how wrong this can go, and prepare.
posted by Sunburnt at 2:04 PM on January 14, 2018
then the house appreciates in value, will I have problems with my siblings later on over inheritances and so forth?
Most definitely. Your father is making an investment that benefits only you, and not the four other kids. At best they will resent you. At worst, litigation over his estate.
posted by JimN2TAW at 11:58 AM on January 16, 2018
Most definitely. Your father is making an investment that benefits only you, and not the four other kids. At best they will resent you. At worst, litigation over his estate.
posted by JimN2TAW at 11:58 AM on January 16, 2018
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posted by ClaireBear at 4:32 PM on January 13, 2018 [3 favorites]