Co-ownership in real estate occurs when multiple owners share a single property. Whether it’s a family affair, an agreement among friends, or a decision made among unrelated individuals, buying a house together logically allows for larger loans and access to properties that might be out of reach for a single buyer. What exactly does buying property in co-ownership entail? Are there precautions to take before making such a decision? Is forming a Real Estate Company (SCI) a better option, and if so, when? Find out in this article!
What is Co-Ownership?
Co-ownership is often a popular choice among couples, although it’s not limited to them. It’s a viable method for realizing a joint project while safeguarding the interests of each party, regardless of what the future holds.
When you decide to buy a house together, each person becomes an owner in proportion to their financial contribution. In other words, there’s no obligation for equal participation. However, those who finance a larger share of the property logically own a greater percentage.
In the event of a breakup or sale, each person recovers their share based on their initial contribution. Note: To enable this distribution when selling the property, the amount financed by each buyer must be specified. Otherwise, it’s assumed that everyone owns an equal share and receives an equal sum of money.
Need advice on buying a house together? Consult a real estate expert.
Alternatives to Co-Ownership
If co-ownership doesn’t suit you, there are other options. You can also form an SCI (Real Estate Company). In this case, the company owns the property, and each buyer is a shareholder, owning shares in proportion to their contribution. This option requires more administrative effort but can be advantageous for protecting all parties and adding specific clauses (e.g., withdrawal of a partner, share buyback).
Unsure if co-ownership is the best option for you? Hesitating between co-ownership and forming an SCI? When in doubt, consult a real estate expert for advice!
Expert Tips to Avoid Pitfalls in Joint Ownership
Risk of Insolvency
When buying a house together, you can borrow more money and afford a more spacious home. However, be aware that if one borrower defaults, the others are generally liable—this is what banks usually require. In other words, you risk having to cover the loan portion that one of the buyers can no longer repay.
To avoid this, take the time to check the financial stability of all buyers and only proceed with those you know are reliable and capable of handling long-term loan payments.
Disagreements Among Owners
If one co-owner wishes to sell the jointly owned property, the others have no choice but to agree. No co-owner should be forced to keep the property, which can lead to disputes, especially when all owners don’t share the same view at a given time.
Generally, all decisions in a co-ownership must be unanimous. Any disagreement, whether about renovations or expenses, leads to an automatic deadlock.
For these reasons, co-ownership is not recommended for those who don’t have a strong and stable relationship.
To resolve issues related to management and disagreements in co-ownership, consider buying a property through an SCI. Seek guidance from real estate professionals to make the best decision.