Investment Property Co-ownership: Leverage Your Liability - PropertyBlawg

Investment Property Co-ownership: Leverage Your Liability

by annbailey on September 24, 2012

(U.S. Law and generally) It has become difficult in this economic climate to purchase any type of vacation or investment property. Most people just don’t have the combined financial and credit qualification that is necessary in purchasing these homes. Luckily, there is more than one method for gaining investment properties. The option of co-ownership is one such method and it has been increasing in popularity over the past few years.

Co-owning a property involves the pooling of money and borrowing power by a group of people which then, as one, pay a deposit and secure a loan for a property. This cleverly allows several people with minimal resources to get partial ownership of a home that they could never afford for themselves. There are several things, however, that each person should do to protect themselves when getting involved in this type of business arrangement.

Figure Out Liability

Co-owners should discuss liability and fully spell it out in their paperwork before finalizing any agreement. If an injury occurs due to the negligence of one of the property owners, the victim will likely sue the negligent party. Unfortunately, if they are unable to recover full compensation for the injury, they will usually be able to sue the co-owners of the property as well. The contract should spell out that if one co-owner is negligent in causing an injury, then that person will take on full liability.

Speak with an Investment Lawyer

Many people make the mistake of trying to handle a co-ownership relationship on their own. Since most people entering into these agreements are not attorneys or even law students, it is important to solicit the services of an investment lawyer.  Knowledgeable in all aspects of this type of agreement, an investment fraud lawyer will be able to discuss the repercussions of property damage, liability suits and will be able to write up a legally binding co-ownership agreement. The use of an lawyer will minimize the chances of future disputes occurring between the owners.

Discuss how Ownership will be Handled

Many people who take on co-ownership of an investment property do so because they would like to have the use of the property during a part of the year. The owners need to lay out exactly how it will be decided who will have access to the place at a particular time. This agreement could be as simple as saying that one owner has access the first half of the year and the other has access the second half. This can of course become more complicated when there are more than two co-owners involved. Laying out these rules at the onset, however, will reduce the chances of uncomfortable circumstances, such as one owner walking in on another during their predetermined time.

Set Rules for Those Who May Want to Sell

As with any type of investment, a co-owner (investor) may decide that their interests would be best served if they sold their portion of ownership in the property. An investment attorney will be able to put a ‘right of first refusal’ clause into the co-ownership agreement. This gives the other owners of the property the right to purchase the share before it’s made available to anyone outside of the initial co-owner relationship. The agreement should also provide details about how the sale price will be decided and delineate that if the other co-owners do not wish to buy the portion of property that is being sold, then the person who is getting out is free to sell as he wishes.

Co-ownership is a great way to secure investment in a fantastic property that a person can’t pay for on their own. The relationship really does benefit everyone that is involved, but there are still some foreseeable snags that could occur. Because these issues are foreseeable, however, it is possible to avoid them altogether. Handling a co-ownership relationship correctly from the outset will ensure that everyone in the agreement stays happy.

Ann Bailey is a former journalist and contributes articles for the business and legal communities.  She adds this informative report for the investment fraud lawyer firm of Page Perry, a Georgia based firm representing parties in group and solo investment ventures.  Clients of the firm are served in various litigation matters and are advised in safe investment practices for joint property ownership as well as other financial venues.


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