Dear Heather: I cannot afford to purchase a house on my own, but I am thinking of purchasing a multi-unit home with my mom. Do you have any advice? — Sharing Expenses

Dear Sharing Expenses: Buying a home is more affordable when you share the costs with friends and family. Pooling resources with a friend or family member can enable buyers to purchase a house they otherwise wouldn’t be able to afford. For young adults who can’t pay for a home on their own, or for several members of the same family wishing to get a foot on the real estate ladder, sometimes co-owning a home is best.

As with any financial arrangement involving close friends or family, planning and careful consideration are needed to prevent future friction. And as with any legal contract, you should consult a lawyer to set the terms, but the following questions will point you in the right direction.

How will you hold the title?

The type of title determines who can sign documents and how the property is transferred in case of an owner’s death. Co-buyers who aren’t married to each other may share a title as tenants in common or as joint tenants with right of survivorship (JTWROS).

How do tenants in common and joint tenancies differ?

When each co-owner has an equal interest (or share) in a home, a JTWROS applies, with one title held between all co-owners. When a co-owner dies, their share goes to the other owners. Ultimately, the last surviving owner will own all shares in the property. The shares of tenants in common may be equal or unequal, and each co-owner has a separate legal title. In a TIC, there is no right of survivorship, so the home doesn’t go to the last surviving owner. Each co-owner can pass along their ownership through a will, meaning that the remaining tenants in common may find themselves sharing ownership of a home with someone they never intended to. Tenancy in common can be dissolved when one owner buys out another, when the property is sold or when one owner files a partition action to sell the home.

How are tenants in common and joint tenancies similar?

In both tenancy-in-common and joint-ownership contracts, co-owners have equal rights of possession, meaning that each may occupy and use the property. If the home is rented, each co-owner is entitled to rental income from the entire property in proportion to the ownership share.

What should we include in a co-ownership agreement?

Sharing the cost of buying a home can benefit everyone involved, but it’s essential to determine ground rules before any money changes hands.

Co-ownership agreements are basically the prenuptial agreements of home ownership; they lay out the relevant rights and responsibilities of each party. While it might be difficult to imagine problems at the outset, when you’re excited to buy a home with family or friends, these documents are important because they are the only way to resolve ownership issues aside from court proceedings.

And when thousands of dollars are stake, it’s important to address at least these three concerns:

What are the ownership percentages?

For joint tenants, this is easy: Each co-owner has an equal share. Tenants in common may choose to divide the shares, perhaps based on the amounts contributed for the down payment.

How are ongoing expenses divided?

The division of recurring expenses such as mortgage payments, property taxes, insurance, utilities and maintenance costs should be spelled out in your co-ownership agreement. They may be divided according to ownership percentages or the amount of time each co-owner will invest in improving or providing upkeep for the property.

What happens when one co-owner wants to sell?

When co-owners want to sell their interest in the house, they are not required to sell to someone approved by the remaining co-owners. However, a co-ownership agreement could grant the remaining co-owner the right of first refusal. Making an investment in real estate with friends and/or family can be a very smart move, especially in a market with lots of opportunity. Be smart, look at all of your options before you buy and make sure the details are set out in writing before you sign the contract.

Heather Chilvers is among Coldwell Banker Bermuda Realty’s leading sales representatives. She has been working in real estate for over 25 years. If you have a question for Heather, please contact her at hchilvers@brcl.bm or 332-1793. All questions will be treated confidentially.