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Take care when sharing home ownership

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There are circumstances in which people may want to share home ownership, but they must tread carefully...

There are circumstances in which people may want to share home ownership, but they must tread carefully if they do not want to end up being responsible for the full purchase price.

This is particularly true when parents buy homes for their children, or investors pool their money for buy-to-let properties, says Shaun Rademeyer, chief executive of bond originator BetterBond.

Sometimes relatives also get together to buy holiday homes, and sometimes family members buy properties that contain several separate dwellings.

“Many of these buyers get an attorney to draw up a detailed co-ownership agreement before applying for a home loan.”

However, he says no matter how they split shares in the property, or what they agree on with regard to maintenance, occupation or income from the property, their agreement will have no effect when it comes to third parties such as banks or municipalities.

“Although the share of the property owned by each purchaser can be stipulated in the title deed and registered in the Deeds Office, the bank that grants the home loan will want both or all of them to sign that they will be ‘jointly and severally’ liable to repay theloan.

“The bank is entitled to recover the debt from all debtors in proportion to their shares or recover the full amount from any of them. If one co-owner stops paying, the others will be required to make up the difference.”

If the loan falls into arrears, the bank will be entitled to call in the debt and demand that all of them, or just one of them, settle the full amount owing or risk having the property repossessed.

The local authority will also not be interested in who owns what percentage of the property if the rates or water and electricity accounts fall into arrears. “It will simply sue all the owners for the debt.”

Rademeyer says all the owners will have responsibilities with regard to the entire property, and not just the portions they occupy.

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