The Importance of a Co-ownership Agreement

February 25, 2021

There are many circumstances in which people might buy a property together. It is easy (and natural) to tell ourselves that there are not going to be any problems, or that if any issues arise we will be able to resolve them amicably – after all, we wouldn’t buy a property with someone we didn’t trust. Unfortunately, experience suggests that this is not always the case. We should hope for the best but it is sensible to prepare for the worst. If we don’t, there are limited options available to resolve disputes. Here we are discussing immovable property – it is potentially even more important to consider a co-ownership or co-habitation agreement.

Co-ownership agreements

By far the best means of dealing with disputes is to think ahead, seek proper advice early, and agree, at the time of purchase, the rules which will govern the co-owners in the event of a dispute. A co-ownership agreement is a good way of achieving this. Such an agreement might include provisions as to whether the property should be sold and, if so, how the sale proceeds should be shared, or provide for the option to buy-out the other’s interest. It can also provide a time-frame within which any sale or buy-out should occur.

Dispute resolution

Where two or more co-owners simply cannot agree on how a property should be occupied, or managed, life can become very difficult. Even if no agreement exists to govern disputes, there is the potential for the parties to try to agree on a resolution between themselves. An amicable (or relatively amicable) agreement may still require the involvement of lawyers and the Court to ensure that it is binding.

There are certain circumstances in which the Royal Court might resolve a dispute by making orders establishing rules for the co-owners to abide by. This form of resolution has been raised as being possible but has not been fully developed. The nature and extent of its availability remains uncertain (and therefore expensive!).

Forced sale

Ultimately the parties could simply sell the property. If the parties cannot even agree on that then a sale can be forced. This is known as an action en licitation. The Royal Court can order the sale of the property. The sale can only be by public auction (at which any co-owners can bid). There is no power in the Court to order a private sale, to order that one co-owner must sell to another, or to order that the property be marketed for sale on the open market.

Co-habitation agreements

Special considerations apply in the context of couples. For those who are not married or in a civil partnership there is no right to seek financial support from one another or to share in the other’s assets or income at the end of a relationship. This can all seem very unfair indeed, especially after a long relationship.

Couples who are purchasing a property together, or where one partner is moving in to a property owned by the other, should consider a co-habitation agreement. This is a legally binding contract between couples where each party has taken independent legal advice and has set out their respective financial positions.

The agreement specifies what will happen to the property upon a breakdown of the relationship. It will cover many of the same points as a co-ownership agreement. It can also specify how the couple’s living expenses are to be shared during the subsistence of the relationship. These agreements are often reviewable upon a change in circumstances, such as the arrival of a child, or upon marriage or civil partnership.

Co-habitation agreements are becoming increasingly more popular as a sensible insurance policy against a relationship breakdown where the door of the family court is otherwise not open. Wherever you are considering buying property with another person you ought to seek professional legal advice – far better safe than sorry.

Please get in touch with our Family team should you wish to discuss any matter related to co-ownership agreements or co-habitation agreements.

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