Do Better: Wise Co-owners Avoid These 5 Flashpoints
Own a home with friends, family, or your partner? Learn which flashpoints to steer clear of in shared homeownership to minimize costs, stress, and risk.
Few co-owners take the time to discuss key issues up front, let alone formalize by getting things in writing. This is a costly miscalculation.
We’ll look at top flashpoints in joint homeownership:
We see a lot of co-ownership situations. Here’s a typical scenario:
- 3 family members take out a $600,000 mortgage to purchase a home together for $780,000
- All 3 are co-borrowers on the loan, co-owners, and occupants
- Co-owners spend more time brainstorming what color they’ll paint the walls than planning how to manage and protect their largest investment.
Better approach: understand common causes of turmoil, then get in front of them. Do this, and you will:
- Save money
- Save time
- Improve your return on investment
So what are the major flashpoints in co-ownership? Let’s take a peek.
💵 Money
Money is a leading source of conflict in love, family relations, and friendship.
- 1 in 3 coupled adults say that money is a stressor in their relationship
- 17% of adults say they’ve fought with family members over finances
- 15% of adults have lent money to friends, with nearly a third waiting for pay-back
Money matters are also a top source of friction in co-ownership. Of course, folks have different situations. An unmarried couple often has unique concerns compared to three single twenty-somethings. The challenges look different depending on the nature of the relationship(s) between co-owners. One thing most co-ownership arrangements have in common is that the actors share financial interests in a sizable asset: their home. The scope for disagreement over money is huge in shared homeownership—where relationships, personal finances, and home intersect.
The most common instances we’ve seen relate to:
🚩 Splitting unexpected costs and emergency expenses
🚩 Disagreements over contributions to past payments
🚩 Missed or late payments by one co-owner
🚩 Allocating net proceeds on sale
Sometimes money is a proxy for a deeper-rooted disagreement. Remember in college when one roommate yelled at the other because they didn’t pay for toilet paper? Same, same.
☝️ Rights
Functional rights
Rights can relate to the use of the property or associated privileges. These types of rights are functional and affect the day-to-day.
Example: spatial rights
👩🏽🦱👨🏾🦱🧓🏽 multi-generational household
Grandma has primary access to the ADU outback
Lisa has primary access to the home office to WFH
Kim has sole access to the garage to park her car
Example: time rights
👭👫 shared vacation home on a lake
Tina and Jen have access to the property in March, April, and May
Barbie and Ken get the summer months (they love to party)
Example: policies
👨🏼🦰👱🏾♂️ primary residence owned by 30-year-old single friends
A guest policy that limits randos to 5 sleepovers a month
Borrowing against the property requires written consent
Agree not to sell the property for at least 18 months from the date of purchase
When co-owners fail to define rights and one person acts in a way that crosses a boundary for another, things can get messy. A new girlfriend who all but moves in can cause discord, but the offense doesn’t have to be sinister. Something as simple as poorly-aligned schedules can spark a fight over noise levels late at night.
Fundamental rights
Fundamental rights, like the legally enforceable right to an ownership interest in a property or control, are on another level.
Disputes over fundamental rights are shockingly common in co-ownership. These situations generally lead to the courtroom and should be avoided.
🔁 Responsibilities
Running a household is hard work. The daily grind of cooking, cleaning, managing finances, paying bills, taking out the trash, doing laundry—it’s easily a full-time job. If you have tiny humans or furry friends, you must keep them happy, healthy, and alive.
I was recently reminded of this when my family took off to Europe for a two-week holiday. On top of my regular household jam, I temporarily inherited full responsibility for the house, the dog, and the yard. There went two hours out of my day, every day, for 15 days. Naturally, all hell broke loose just three days in. It was Wednesday, and I was working from home. As sh*t kicked off between back-to-back work calls, the dog got sick and puked everywhere. Next, the toilet broke--as if by magic. Plumbing problems are never fun. Plumbing problems when your home runs on a septic system are a disaster. The yard didn’t get watered that day.
Sharing responsibilities is a significant draw to co-ownership. It works well when each participant performs as expected. Conversely, things turn ugly when someone fails to perform.
⚡️ Unexpected changes
In life, circumstances change. We’re not always great at predicting change. Research suggests humans have developed an optimism bias that causes us to overestimate positive outcomes and underestimate risks.
Co-owners are less likely to plan for unexpected changes if they aren’t top of mind or perceived as probable.
Examples from our six years working with co-buyers and co-owners:
- Changes in income: If one co-owner loses their job or experiences a significant decrease in income, it can strain finances and lead to disagreements about how to cover the mortgage, property taxes, and other expenses.
- Changes in employment: If one co-owner receives a promotion, transfer, or new job offer, their living arrangement may need to change. This can trigger a fundamental rethink about the co-ownership arrangement.
- Changes in family size: If one co-owner has a child or adopts a pet, it can increase the home's demand for space and resources. This can lead to disagreements about using the space and who is responsible for the additional expenses.
- Changes in lifestyle: If one co-owner starts working from home or starts to travel, it can disrupt the routine of the co-ownership. This can lead to disagreements about noise levels, privacy, and who cares for the home when the other co-owner is not there.
- Changes in health: If one co-owner experiences a severe illness or injury, it can significantly burden other co-owners. This can lead to disagreements about who is responsible for providing care, how to pay for medical expenses, and whether to modify the home to accommodate the co-owner's disability.
- Changes in relationships: If one co-owner gets married or divorced, it can change the dynamics of the co-ownership. This can lead to disagreements about dividing responsibilities, who is responsible for making decisions, and whether to sell the home. New relationships can also impact dynamics between co-owners.
- Death: If a co-owner dies or experiences a death in the family, this can have existential consequences for the co-ownership arrangement and the surviving co-owners.
💬 Decision-making
Multi-party decision-making is an art and a science. Decisions require consensus: people have to agree. If everyone is on the same page, it’s easy. But what happens when opinions differ?
When co-owners can’t agree on key decisions about the home they own together, things get messy.
Examples:
- Decisions about maintenance or repairs
- Decisions around improving or upgrading the property
- Decisions over contributions (financial or non-financial)
- Decisions related to plans for the property (e.g., usage, renting it out, timeline for a sale, etc.)
Pro tips
Good news: you can avoid these flashpoints.
Treat co-ownership as an investment if you co-own a home with a friend, boyfriend, girlfriend, or family member. It’s not just a financial investment; it’s an investment in your relationship(s), home, and well-being.
To save money, time, and headache, here’s what you need to do:
1️⃣ Plan
Get on the same page about different situations and how you’ll handle them. Don’t assume. Remember, you want to close the gap between expectations and reality for everyone involved.
2️⃣ Structure
Get your decisions in writing, including a co-ownership agreement. Don’t leave things to chance. As things change, update your preferences. It’s easy if you have a system!
3️⃣ Manage
Keep on top of documentation. Manage your situational changes with regular check-ins, and reflect these by updating your co-ownership agreement. It’s not “untrusting” or “unsexy” to update a key document with a loved one. It’s good financial hygiene. If something bad happens, it will protect everyone involved.
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Check out our other posts:
Ultimate guide to shared homeownership
The 3 stages of shared homeownership