Separate Mortgages

Australia's housing affordability crisis has put buying property beyond the reach of an increasing number of young adults. But there's no reason why you have to go it alone. By pooling resources between family members or friends, buyers can share possession and ease the burden of a crippling mortgage.

There are many issues to consider before purchasing a property jointly. The first is to decide which form of partnership you will be entering into. A common method for couples is to own property as joint tenants. By entering into a 'joint tenancy' agreement, buyers agree that possession is passed on by survivorship. On the death of one joint tenant, the property held as joint tenants automatically passes to the surviving owner of the property regardless of their will.

This form of contract is not particularly suited to friends or business partners for obvious reasons. They are more likely to take out a 'tenants in common' contract. The property owned by a tenant in common is preserved on death and goes to the estate of that partner as specified in a will. Partners who venture into a 'tenants in common' agreement are encouraged to have an up-to-date will before doing so.

When you are tenants in common, you also have the freedom to own an identifiable share of the property. If one partner takes out 75% of the mortgage and the other 25%, this is set out in the sale deeds and outlined in the co-purchasers' agreement. Partnerships may also involve three or more parties as a syndicate of investors in a property trust.

Ok, the co-purchasers' agreement. This is a detailed legal document outlining the contribution and the obligation of each party. The co-purchasers' agreement should stipulate what action is to be taken should things come unstuck. It should include a clause on how the property is to be marketed when sold, what happens to any capital gain and how the property is to be valued, among other things.

It's also important to note that the First Home Owners Grant Scheme is only payable once per property. So, in the case of joint tenants, the situation is much the same as if those tenants were co-applicants or partners. Both parties have to meet the eligibility requirements to receive the one grant for the one property. Only one application is processed and one bank account nominated to receive the funds. How the receivers of the grant split up the money is up to them.

Parties contemplating joint ownership of property should give careful consideration to the aims and objectives of joint ownership and consider a wide range of legal issues and possible ramifications before committing to purchasing property together.

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