You might consider buying property with your spouse, common-law partner, or friend. A question you might have is, what’s the best way to structure the type of home ownership available to you? There are three main ways for individuals to own property: sole ownership, tenants-in-common, and joint tenancy. The way the title is held affects the estate and beneficiaries. In this blog, I’m going to focus on tenants-in-common ownership.
Tenants-in-common living is a good option for seniors. It’s especially true for older adults who might have children from previous relationships. Your estate will be settled according to your will, and your equity portion will be distributed to your beneficiaries. Since property is typically the most valuable asset a person owns, the details of how the title is held are crucial in determining who gets what and when. Some potential pitfalls or challenges with tenants in common ownership can arise upon the death of one of the owners.
Splitting Ownership & Interest
Regarding probate or an estate dispute, it can be challenging to determine the value of a tenant-in-common’s share. Is a 25% interest worth 25% of the gross market value of the property? What about real estate commission and other expenses affecting the sale? Does the other tenant-in-common have an option to purchase? What does that process look like? Is there a right of first refusal? These considerations should be determined before buying property together as tenants-in-common. From my experience, these situations should always be handled in consultation with a lawyer. Making fair contracts/agreements when everyone is friends or living is best.
When the title is held as tenants-in-common ownership, each owner has a divided percentage of ownership interest in the property. If the ownership rate for each isn’t specified, it’s considered equal. This is why you want it to be put in writing. I always recommend doing this with a lawyer to get professional legal advice.
Looking to downsize from your current home? Explore these related blogs for more advice.
- What Seniors Need to Know About Downsizing for Retirement
- Should I Buy a Home or Sell First as a Downsizer?
- 5 Signs It’s Finally Time To Downsize
Should Seniors Sign a Cohabitation Agreement?
Another reason tenants-in-common ownership is good for seniors is how the property will be divided if a relationship breaks down, especially when the couple comes together as established adults and isn’t legally married but chooses to live in a common-law relationship. It would be best to consider having a cohabitation agreement when owning property as tenants-in-common. The main reason is that everything is spelled out for how you want things handled. In case of a relationship breakdown, you can potentially avoid having the courts make decisions for you that you wouldn’t have otherwise agreed to. Again, this should be done in consultation with your lawyer.
A prenup (marriage contract) or a cohabitation agreement is essential. I have helped clients in this situation, too. In my client’s situation, they were common-law partners, so their divided ownership as a percentage was previously determined, and they had tenants-in-common ownership. As part of their cohabitation agreement, they needed to have the property independently evaluated by three realtors, and the average of the three evaluations was used to determine the property’s market value. They had a provision in the agreement for a first right of refusal, but in this case, neither person wanted the house for themselves, so we listed the property and sold the home. Both parties went their separate ways. From the beginning, through their lawyers, everything in writing reduced the situation’s stress and allowed for a clean break.
Buying a Home With Friends
A growing trend among older adults is friends deciding to own property together. Think of the Golden Girls. It makes sense financially for many. They value home ownership, but doing it alone is too much. It allows you to continue growing your equity while creating affordable housing. Maybe you and your co-owner(s) decided you want to age in place and will pool resources together regarding care and support while you age.
I’ve had numerous conversations with people contemplating this. If you have opted for home ownership, it is essential to determine the best ownership type for you and your co-owners. This should be done in consultation with a lawyer, as it can be more complex.
Another reason tenants-in-common living is good for seniors is the emotional perspective. Maybe you’re a widow and don’t want to live alone, or you have already raised a husband and don’t want to do that again. Perhaps you fear the loneliness of living alone, so companionship is a great option.
Tenants-in-common & Estate Planning
Tenants-in-common living is a good option for seniors in this example. Determine each owner’s share up front and have it put in writing. There are many other considerations, such as what happens if one of the owners has no capacity. You want to ensure that your Power of Attorney or Executor (if they’re different) knows your wishes. It’s essential to continually update your will and Power of Attorney when things change.
First, you must consider what will happen to you if your co-owner passes away. Can you purchase their share of the property from their estate? If not, you should have previously agreed to what the protocol for selling the property is. Ensure you have a contingency plan for the various scenarios you might face. Planning is crucial for reducing stress in what will no doubt be a difficult time in your life.
Searching for the right place to call home in the next chapter of your life? Explore these blog posts next.
- Is Scarborough Good For Seniors?
- Scarborough’s Best Neighbourhoods For Downsizers: Guildwood “The Guild”
- Best Small Towns for Retirees in North Durham Region
Always Have a Plan
Having a plan and adjusting as things change or time passes is critical. As a senior real estate specialist (SRES), I have numerous examples of clients and family members who have chosen to age in place.
My grandmother, who is 90, and her common-law partner, who is 95, are at a point where their health is changing. We’re having a geriatric social worker assess what support we should bring into the house for them. They live together independently in a bungalow on the east side of Toronto.
They are no longer as independent as recently as six months ago, though. In conversations with her, she’s genuinely concerned about what would happen to her if something happened to her partner first. It’s not nice to think about death, but at their age, it’s a reality. She said that she wouldn’t want to live in the house by herself if he passed first.
Having a plan for selling the house, the proceeds of his shares would go to his remaining family. He never had kids, but he has younger siblings who are beneficiaries of his estate. My grandmother will move to a simple apartment where she can live comfortably. She will also have the luxury of taking the necessary time to find suitable housing. We have a solution for her concerns so it’s one less stress for her. Having these things spelled out legally, in writing, is comforting for both as a couple. They both want what’s best for each other, and they know whatever happens, everything is looked after the way they want it to be. Living as tenants-in-common is good for them as seniors who have chosen to age in place.
Work With a Senior Real Estate Specialist
Working with a senior real estate specialist (SRES) is important for older adults. Having an expert with specialized expertise will reduce stress and provide valuable resources when dealing with delicate and challenging circumstances as you navigate your next chapter.
Looking for a Senior Real Estate Specialist to help you buy or sell? Call 647.283.2127 or email me at stuart@stuartnodell.com to get in touch.
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