Co-ownership is when two or more people who are not married to one another share ownership interest in a home. Co-ownership is also commonly referred to as shared, fractional, or joint homeownership.
You can co-own a home with a friend, family member, partner, or all together. Married couples also get in on the action! They make up roughly 20% of all co-buyers and co-owners, according to our Co-buying & Co-owning a Home 2023 Report.
📊 Co-habitation in numbers • Family: nearly 20% of the US population lives in an intergenerational household • Unmarried couples: 8% of all US households • Friends: 4% of all US homebuyers
How is co-ownership different from “traditional” homeownership?
In the US, homeownership is single-player by design. All the systems that facilitate homeownership—financial, legal, tax, accounting, and others—have developed to accommodate either a married couple or an individual as a homeowner. Why? For much of the twentieth century, nuclear households were the norm.
Today, living arrangements are diverse, and households come in all shapes and sizes. Nuclear households now account for less than half of the national total, with over 15 million jointly-owned homes comprising nearly 50 million people. Unfortunately, our institutions, laws, and systems have not yet caught up. If vanilla homeownership is challenging, co-owners face more complexity, costs, uncertainty, and risk across the entire homeownership lifecycle.
ℹ️ Co-owners don't enjoy the same legal and tax protections as married couples if someone dies, becomes incapacitated, or has disagreements.
How does it work?
Each co-owner has a stake in the property with roles, rights, and responsibilities. It’s helpful to think of co-ownership as similar to a business partnership. In both cases, you have:
Co-owners depend on one another to fulfill their obligations, and the actions of one can negatively impact the finances of all. For these reasons and more, joint finances, expenses, and payments often present a challenge at some point during the co-ownership lifecycle. Common flashpoints involve failure to pay, emergency expense handling, taxes, and allocating net proceeds upon the home's sale.
Alignment is tricky! In dealing with thousands of co-buyers and co-owners, we’ve observed a clear pattern: a structured approach to joint decision-making delivers the best results for everyone involved. Conversely, things don’t end well without an intentional approach to building (and maintaining) consensus. Four vital drivers of effective joint decision-making are communication, transparency, coordination, and cooperation.
Many folks neglect to keep track of important documents, records, and receipts. This is usually because documentation (a) isn’t exciting, (b) is hard to pull off without a system, or (c) they genuinely aren’t aware of how important it is to their personal and financial interests.
Some conflicts can be avoided with proper planning and active management, but disagreements are part of life. Disagreements in shared homeownership can stem from:
Fundamental differences in opinions, preferences, or expectations
Changes in circumstance
Failure to meet obligations
When co-owners fail to implement a mechanism for dispute resolution ahead of time, even minor issues can quickly escalate.
Co-owners frequently have to navigate complex issues without guidance or support. It’s hard to plan for situations you don’t know exist, and even more challenging after a situation develops into a bonafide problem.
What are the risks?
Nobody likes to think about risks, but ignoring them doesn't make them disappear.
⚠️ Sunk time and energy
Triggers: Conflict between co-owners, Inadequate planning, Poor documentation
Example: Four family members co-own a home in which two are occupants and two are non-occupant investors. A difference in opinion emerges as to whether a leak in the roof constitutes a necessary repair that requires professional work or can be addressed DIY. A three-month argument ensues, during which deadlock prevents any progress. Meanwhile, water damage continues until a total roof replacement is required at $8,000.
⚠️ Surprise expenses
Triggers: Breakup or divorce among co-owners, Death of a co-owner, Disability of a co-owner, Inadequate planning, Missed or late payments, Poor documentation
Example: A group of friends co-owns a home. Roles and responsibilities are left to chance. A communication breakdown results in a missed homeowner’s insurance payment, which in turn causes a lapse in coverage just before a burglar breaks in and steals $18,000 worth of electronics. When coverage is resumed, the insurance provider raises the premium by 25% to reflect the increased risk.
⚠️ Financial loss or bankruptcy
Triggers: Death of a co-owner, Inadequate planning, Job loss or transfer, Missed or late payments, Poor documentation, Unauthorized borrowing against the property
Example: An uncle and adult niece co-own a home. Life events cause the pair to sell the home sooner than expected when the uncle discovers that the niece has tapped equity in the home to purchase a new Beamer. The uncle is forced to come out of pocket to cover $12,000 worth of outstanding debt plus selling costs.
⚠️ Credit impairment
Triggers: Missed or late payments, Unauthorized borrowing against the property
Example: Two adult parents co-buy a home with their adult son. All parties are listed as co-borrowers on the mortgage, and the son is the home's sole occupant. The son fails to make mortgage payments for 60 days. When the parents decide to apply for a car loan the following week, they learn that their credit scores have dropped 125 points.
⚠️ Foreclosure or repossession
Triggers: Missed or late payments, Unauthorized borrowing against the property
Example: Three best friends work at the same company and co-own a primary residence. All three are laid off in the same week when the economy enters a recession. Failure to repay their mortgage for four months results in the lender initiating a foreclosure suit.
Triggers: Breakup or divorce among co-owners, Conflict between co-owners, Death of a co-owner, Poor documentation, Unauthorized borrowing against the property
Example: Two couples co-own a home at which they alternate occupancy throughout the year. Usage rights have been loosely agreed upon without ever being recorded. Still, both sides have shown flexibility until a sudden change in life circumstances. An argument over rights to the property during summer months spirals out of control and kicks off an 18-month legal battle.
⚠️ Forced sale of the home
Triggers: Breakup or divorce among co-owners, Conflict between co-owners, Death of a co-owner, Missed or late payments, Job loss or job transfer
Example: Following the death of a co-owner, their named beneficiary inherits ownership interest in the home. The succeeding beneficiary is unknown to the surviving co-owners and files a partition action, resulting in a forced sale and a $75,000 bill.
Triggers: Death of a co-owner,Inadequate planning, Poor documentation
Example: An unmarried couple co-owns a home, holds Title as Tenants in Common, and are both listed as co-borrowers on a mortgage. Neither co-owner has a Will, nor has the couple created and executed a Co-ownership Agreement. After the untimely passing of one co-owner, a 9-month long probate process begins. During this time, the surviving co-owner is on the hook for the mortgage payments and is unable to sell the property.
⚠️ Damaged relationships
Triggers: Conflict between co-owners, Death of a co-owner, Inadequate planning, Missed or late payments, Poor documentation
Example: Two single friends co-own a primary residence with equal ownership interest. One co-owner begins a long-term relationship, and their new partner transitions into a full-time roommate despite protests from the other co-owner. Resentment grows, and the friendship never recovers.
How do we structure ownership?
Structuring ownership involves two related decisions:
How you hold Title to the property
How you divide ownership interest
Many co-owners choose to hold Title as either Tenants in Common (TIC) or Joint Tenants with Right of Survivorship (JTWROS).
Tenants in Common allows co-owners to have equal or unequal ownership interests as a percentage. Upon the death of a co-owner, their ownership interest passes to the beneficiary specified in their Will.
Joint Tenants with Right of Survivorship creates equal and undivided ownership interests in the property. If a co-owner dies, their ownership interest transfers immediately to the surviving co-owner(s) without probate.
Other options include LLCs and trusts. A Limited Liability Company (LLC) is a business structure that can combine the pass-through taxation of a partnership or sole proprietorship with the limited liability of a corporation.
Ultimately, it's up to you and your co-owners to decide how you share ownership.
The format of Title is established when the property is first transferred to co-owners. The deed that transfers the property will specify the type of Title being conveyed. Title can be changed later on but may require a new deed to be recorded.
How should we split equity?
Some co-buyers choose to split ownership interests equally. Others prefer to divide ownership interest unequally based on factors such as individual contributions or rights to the property. That said, how co-owners hold Title to the property may imply constraints. Co-owners who hold Title as Joint Tenants, for example, necessarily have equal and undivided ownership interests.
How do we handle expenses?
Staying on top of all cash flows is critical to success. The level of detail in your plan depends on your situation. Here are a few simple steps:
1. Map out all cash outflows. Most expenses fall into one of two categories:
• Recurring expenses,which come due at regular intervals:
Mortgage, insurance, private mortgage insurance, property tax, HOA/condo fees, bills, home warranties, and home services
• Non-recurring expenses:
Maintenance, repairs, incidentals, emergencies
2. Discuss and agree on how to divide expenses. Splits don’t have to be equal, but it’s important to speak openly, align, and establish clarity around the timing and amounts of individual financial contributions.
3. Define the mechanics of payment. Remember that recurring payments come due at different intervals, may be fixed or variable, and generally need to originate from a single source.
4. Specify how you’ll track shared expenditures. Hunting for crumpled receipts or emails when it’s time to square up with each other or the tax man is no fun.
5. Record everything in your Co-ownership Agreement to make it official. Writing it all down helps avoid confusion, conflict, and headache. As circumstances change, repeat these steps as necessary.
Why is documentation such a big deal?
In co-ownership, documentation involves getting things in writing and keeping all related files, records, and receipts up-to-date. Not documented? Didn’t happen.
Developing a document management system improves ROI from both the revenue and the cost side. A robust system also increases visibility, empowers informed decisions, and streamlines admin.
Do we need a written agreement?
Absolutely. Getting things in writing isn’t just a good idea—it’s essential. Co-owners should create a Co-ownership Agreement that covers all aspects of the co-ownership arrangement, including participation, ownership structure, finances, terms, risk handling, and exit strategy.
A robust agreement is much more than a piece of paper or PDF. It reflects a consensus between parties and provides a framework for managing co-ownership over the whole lifecycle. Rather than a static document hidden in a drawer, it should be dynamic, easy to update, and verifiable.
💡With a Co-ownership Agreement, you get out what you put in. Some co-owners skip it altogether. Others fill in a templated document and call things good. In our experience, a lax approach to managing your largest (co)investment is like playing Russian roulette.
What happens if we disagree?
There are three main avenues:
➡️ Plan and build consensus early/often to minimize the scope for conflict
Prevention is the best medicine. When given due attention, planning and building consensus, setting terms, and codifying by executing a Co-ownership Agreement is powerful.
➡️ Include alternative dispute resolution in your Co-ownership Agreement
The next line of defense is alternative dispute resolution. Mediation and arbitration are two ways to leverage neutral third-party intermediaries to avoid costly legal battles.
➡️ Lawyer up
Most of the attorneys we’ve worked with over the years caution against this option. Legal action and litigation are costly, and in some cases, the costs can exceed the home equity you’ve built. In the most extreme cases, litigation can last for many months, freezing the asset and preventing co-owners from partitioning or selling the property until the long arm of justice has taken its course.
What if someone wants to leave?
Since 100% of co-ownership arrangements will eventually end through full or partial sale, transfer, or death, every co-ownership arrangement needs to create and document an exit strategy. We’ve seen unique circumstances, but practically speaking, there are a finite number of exit scenarios. Co-owners should consider, discuss, and agree on how to handle the most common of these.
An exit strategy documented correctly in your executed Co-ownership Agreement provides a backstop. Co-owners can always handle things differently if everyone is on the same page.
💡A transfer of ownership interest may trigger a lender’s due-on-sale clause or a taxable event.
What if someone dies?
The death of a co-owner can be a complex issue. The ownership interest of the deceased owner can pass to their heirs or other co-owners, depending on the ownership structure, the terms of the Co-ownership Agreement, and whether any other estate planning documents exist. Additional complications may arise if there are outstanding claims, liens, or judgments.
Can we rent out the home?
Yes, as long as all co-owners agree and the terms of your mortgage permit.
All co-owners should agree on how to deal with these situations in advance. Include relevant details in your Co-ownership Agreement and amend as necessary.
If you have an outstanding mortgage, check your loan terms or contact your lender first to confirm whether permission is required or conditions exist.
⚡ Key takeaways
Approach co-ownership with a business mindset
Invest time to plan, structure, and manage co-ownership
If it isn’t documented, it didn’t happen
Codify a Co-ownership Agreement that reflects your ideal outcomes
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