When a group of individuals co-own property a formal agreement is advisable to outline the rights and obligations of each owner as well as the exit strategy. The distinction between a Co-Ownership Agreement and a Tenancy in Common Agreement is that the owners jointly own property and any transfers of interest require the participation of the other owners. For example co-ownership of a single family dwelling versus multi-units with each owner have exclusive rights to a particular unit.
A Co-Ownership Agreement can contractually supersede the way the owners hold title, for example, two owners may hold title 50%-50%, but in actuality one party has contributed more towards the down payment for the property. The agreement can outline the contributions made by each owner as well as how they will pay expenses on a going forward basis. Disparity in contributions can be addressed in the distribution of money in the event of a sale, refinance, or other event.
An agreement should specify how decision-making will occur including procedures for voting, meetings, and cash calls. In addition, usage rights can be as general or specific as required by the parties. For example, co-owners may wish to have particular areas of the property for their exclusive use or all co-owners may have rights to all portions of the property.
Accounting for the property should be as formal as possible to ensure that in the event of a dissolution of the co-ownership, the contributions and, to the extent applicable, loans between the co-owners are documented. A segregated account for the property into which all contributions are made and payments are run through will avoid disputes.
The Co-Owners should determine at what point one Co-Owner could force a buyout of his/her interest or a sale of the entirety. The Agreement should delineate the process for triggering a sale or buyout including notices, timelines, and valuation processes.