The plan to invest in a property, like an RFO property, is a great idea and an amazing life experience. However, with the current financial climate, owning a property might be a challenging feat. However, for someone who has set his eyes on owning a property, there are lots of ways to be able to do so. For unmarried couples who have been living together, it is possible to share the financial responsibility of purchasing a piece of property together. However, the couple that will be future co-owners of a real estate property must be aware of the challenges and risks as well as the preparation they need before taking this big step.
To better understand the concept of co-ownership, it is best to understand what co-ownership is. According to condopundit.com, co-ownership or joint ownership is a shared living arrangement where two or more people own and live in a home together. Simply put, more than one person has an ownership interest in a property, may it be a condo unit or a house and lot. Examples of co-ownership include common occupancy or tenancy in common, joint ownership, community property, and tenancy by the entirety are all examples of co-ownership.
The Common Types of Co-ownership
The unmarried couple living together may explore which agreement is best suited for them. To define tenancy in common, it allows two or more parties to own a financial share of a property and transfer their interests independently. This offers a more flexible form of property co-ownership by allowing parties to buy and own a property in equal or unequal shares. Joint tenancy, on the other hand, are tenants as a couple, having a property owned in common.
For couples who are cohabiting or living together before marriage (or entering into a civil partnership) or still in the process of getting married or forming a civil partnership, it is advised to consider signing a cohabitation agreement in order to simplify the process in case of a breakup.
Advantages and Disadvantages of Co-ownership in Unmarried Couples
Like in any agreement, co-ownership has its benefits and drawbacks. Some of the benefits, of co-ownership offer are:
- It offers a way to pool funds with friends or family to purchase a property in the soonest time possible. The couple may decide to invest in RFO properties vs. buying a lot and building a house. This way, the co-owners were able to own and invest in a property in a short period of time without having their pockets ripped.
- It eliminates having to wait for a long period of time to save for a large deposit. This gives the co-owners a chance to share instead of one taking on the heavy burden by himself. And don’t you think that time saved is money saved as well?
- It increases the possibility of pooling borrowing power when applying for a loan. The scenario of borrowing funds with a co-owner improves the chances of getting a higher loan amount and a competitive interest rate because the lender considers two incomes for repayment instead of just one.
- It helps reduce both transaction and living costs.
However, the co-owners may also be faced with the following drawbacks:
- It tests the relationship and at the same time puts finances at risk.
- Co-owners are liable for each other debts especially if the property is used as collateral for a mortgage.
- It may be a cause of conflict when one of the co-owners is not able to keep up with his/her share of ongoing expenses.
- It may also cause a falling out between the co-owners if one co-owner decides to sell the property and the other doesn’t.
- It impacts future borrowing power as lending companies consider the entire co-ownership loan as the responsibility of each co-owner and not just a share of the loan.
Co-ownership Guidelines for Live-in or Cohabiting Partners
The following co-ownership guidelines shall be followed in accordance with Article 147 of the Family Code for Live-In Partners to Be Considered Co-owners of a Property:
- The couple are not yet married but can get married any time they decide to.
- The parties do not have an open relationship, but they live together solely and not sharing a residence with other men and women.
- To gain the status of common law marriage, the co-owners must actually live together to establish that their relationship is not just a passing one where the guy just visits and stays for an extended time.
- Both parties are not legally married to another or if they are married to each other, their marriage is null and void for other reasons, such as failing to get a valid marriage license and not because one or both of them are already legally wed to someone else.
Legal Grounds of Co-ownership Outside of Marriage in the Philippines
- The co-ownership rules will apply to properties the parties obtained while living together. This means that the live-in partners are considered to possess all properties in proportion to their respective efforts in gaining them.
- The partners co-own the property equally even if there is no evidence of one’s involvement. In this case, it is presumed that properties acquired during cohabitation may have been acquired through joint efforts, work, or industry.
- Suppose neither the man nor the woman contributed to purchasing the property. In this case, the partner who contributed through efforts in the form of providing maintenance of the family and of the household shall still be designated a co-owner of the property. In addition, that partner shall be deemed to have contributed jointly to the purchase.
- Even if one of the co-owners didn’t contribute money to purchase the property during cohabitation, they will be treated as equal owners.
- In cases where only one party earned the wages and salaries and the other did not participate, the co-owners should own and equitably divide the wages and salaries earned during the cohabitation into equal shares.
- If one partner, either the man or woman, regarded as beneficiary or heir, should exclusively own any property acquired by donation or inheritance. Such given or inherited properties will not be transferable to the other party. The property acquired through gift, donation, or inheritance shall remain the exclusive property of the beneficiary or heir and will not be considered as a co-owned property.
- The live-in partners shall share responsibility for the upkeep of their co-owned property. It should be understood by each co-owner that they cannot sell or dispose of each other’s share or even transfer their share to a third party until the end of their cohabitation period.
The Rights of A Co-owner
When it comes to the rights of a co-owner, it is the same as that of an owner. However, to be more specific, below is a list of rights of a co-owner (from Alburo Alburo and Associate Law Office):
- Right to a proportionate share in the benefits as well as the charges to the co-ownership
- Right to use the co-owned property on the premise that it will not injure the interest of the co-ownership or prevent the other co-owners from using it
- Right to initiate legal action for the ejectment of occupants in the co-ownership
- Right to compel the other co-owners to contribute to the expenses for the preservation of the thing owned in common and to the taxes
- Right to compel co-owners to a pro-rata share in the necessary expenses and income as mentioned above
- Right to demand partition of the real property at any time
- Right to make alterations with the consent of the co-owners
- Right to alienate, assigns, mortgage or substitute as regard the portion of his/her shares or ownership.
Owning a property early in life is an achievement that is to be celebrated. Sharing the financial burden with your special someone in acquiring a property is a smart move and when done properly may be an amazing experience with your partner. While it is true that co-owning a property will test the relationship of an unmarried couple, it may also strengthen the bond the couple already has.
Related Blog: Pros and Cons of a Co-Ownership Property
