Buy a House with Friends Agreement
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Download the Buy a House with Friends Agreement Sample
Put in the address:
Apartment 34, Forrestal Apartments 14 Walker Avenue
New South Wales
You get to attach a copy of the title documents at the end of the Deed (after you print out the Deed).
That is OK.
You know basically the price you are going to pay and you know what your capital contribution will be. You just haven't found the Property yet.
It is a great idea to enter into the Agreement as soon as possible, even before you have found the property you want to buy.
Leave the address blank. A space will be left for you to complete the address once you have printed out the Deed.
Purchased the property with your friend some time ago? Still get on well? Well now is your chance to document what you want to happen if one of you wants to sell.
This document works for you.
If you have decided to give or sell part of the property to a friend then you can document what you want to happen if you fight, die or want to sell.
Joint Tenancy and Tenants in Common
You are about to get a crash course in Joint Tenancy and Tenants in Common.
If you own an asset, like a bank account or real estate with another person you can only own it in 2 ways: Joint Tenants or Tenants in Common.
If you own the property as Joint Tenants then when you die your interest goes to the survivor. For example, my wife is always threatening to leave everything to the dog home. Let us say she does. She dies. We own a family home together as Joint Tenants. Does her ½ of the family home go into the Will and then to the dog home? No. Her ½ of the house never even made it into her Will. Why? This is because the survivor gets her interest in the house automatically.
There are a few tricks with Joint Tenancy. You need 4 things:
1. Acquired property at the same time. (If my wife got her ½ from her mum and I got my ½ from her dad a year later then we can not own the property as joint tenants.)
2. Hold the same proportionate interest. (If my wife held 51% and I held 49% then it is impossible to hold that property as joint tenants.)
3. You need an “undivided interest”. (If on the title deed it said that I was only allowed to use the garage and she got possession of the house itself, then we could not own the property as joint tenants.)
4. You need to have to want Joint Tenancy. If you request that the property be put in your names as Tenants in Common then it overrides the above 3.
If you don’t own the property as Joint Tenants then you own the property as Tenants in Common. If you own the property as Tenants in Common then when you die your bit of the land (e.g. 25% or whatever it is) goes according to your Will.
WHO MOSTLY HAS “JOINT TENANCY”?
Pretty much only married or Defactos couples would consider holding assets as Joint Tenants. Let us say you purchased a property with your brother. If you died wouldn’t you want your interest in the house to go to your spouse? Non couples generally purchase property as Tenants in Common.
HOW DO I KNOW IF I HOLD MY INTEREST AS JOINT TENANTS OR TENANTS IN COMMON?
Have a look at the contract you are about to sign to purchase the property. It will tell you. If you already own the property have a look at the title deeds. It will often tell you. However, the title deed may be silent on this. You therefore have to go back and to the 4 tests above. Sometimes you can own the property as Joint Tenants without it actually saying so (provided the 4 conditions above are met).
HOW DOES THIS IMPACT ON MY JOINT PURCHASE AGREEMENT?
While you are still all living it makes no difference whether you hold a property as Joint Tenants or not. If you have a fight the Joint Purchase Agreement still takes over. If you die then your Joint Tenant survivors get the property anyway. If you die and you owned the property as Tenants in Common then your lucky beneficiaries are subject to the Joint Purchase Agreement.
Each person that is buying the property is called a Co-purchaser. If you and your friend are buying a property together then you are both Co-purchasers. You will both, therefore, need to be party to the Deed. There must be at least 2 of you for the Agreement to work.
A Co-purchaser can be a natural person or a Company and can be acting for themselves or as trustee for others.
You should enter each Co-purchaser's full name because the same names will need to be registered on the title document as well.
A syndicate is '..a group of people who combine to buy property..' (Oxford Dictionary).
In this Deed, the 'Syndicate' is not a separate entity but a combination of individuals (humans, companies or both)with a common purpose as Co-purchasers of the Property.
The word 'Syndicate' is used when referring to all of the Co-purchasers, not just a class or group of them.
If the Co-purchaser is a human then you need to put in the first name, the middle name and the surname.
You do not need to put anything in the 'ACN' field. Only companies have an 'ACN'.
If the Co-purchaser is a company, you do not need to put in a first name or a middle name. But you must put in a company name and an 'ACN' in the appropriate fields.
The 'ACN' stands for Australian Company Number. Every Australian company has one. You need to use the ACN on all important documents - such as this one.
If you don't know the ACN for the company that is OK. WizardDocs will leave some space for you to write it in later, after you print out the document.
This information is used in the Deed and is also registered on the title to the Property. It is therefore important that it is as complete and accurate as possible.
You may however use abbreviations such as 'ACT' for 'Australian Capital Territory' or 'WA' for 'Western Australia' etc.
You can put in a postal address if you prefer.
The % sign is already in. Please don’t type it in again.
The interest in the Property is the portion or share of the land and fixtures that each Co-purchaser will own.
You can only express that interest as a percentage. For example you if you had 1/3 and your friend had 2/3rds then you would type in for yourself 33 1/3 (leave of the percentage mark). For your friend you would type in 66 2/3 (again leave out the % mark).
Here are some examples of percentages (remember leave out the % mark):
For example if you typed in 75 then this means that this person has 75% of the property.
At the end of the day all Co-purchasers' interests when added together must equal exactly 100%.
This is the amount of the initial contribution by a Co-purchaser. Does it make a difference where the Co-purchaser gets the money from? No it doesn't. They may borrow the money from the bank which all the Co-purchasers agree to pay back.
The Upfront Capital Contribution must be the same as the value of the Interest of that Co-purchaser has at the start of the Agreement. It is the same ratio to the Upfront payments of other Co-purchasers as the Interest is to the Interests of other Co-purchasers.
For example, let’s say your Co-purchaser (Fred) wants a 25% Interest in a $100,000.00 Property but only has $10,000.00 to pay up front. Fred either has to raise another $15,000.00 or settle for only a 10% Interest in the Property. He can get that $15,000 from his mum or borrow it from the bank. He can use the Property as security. He can even have you owing the debt with him. This Deed however, states that he owes the money. If you guarantee the debt or act as one of the debtors then the bank can sue you, and you alone for the debt. The bank can seek to sell the Property. However, under this Deed you can seek to recover the loss from Fred. If Fred has disappeared then you may find yourself out of pocket.
If Fred has put up 15% of the value of the Property then Fred is liable for 15% of the cost of purchase. This includes incidental expenses, such as fees, commission, insurance premiums and transfer duty.
If a Co-purchaser does not have enough money to pay 'up front' for their Interest, you may be happy to allow them to borrow the money from a bank and allow the Property to be used as security. You may even wish to guarantee or be a co-debtor for that loan. If you are personally going to loan the money to your Co-purchaser then make sure it is properly documented with a loan agreement. A property mortgage would even be better. This is a separate agreement.
Won't the Co-purchaser end up paying a lot more?
Yes they will. It costs money to borrow money. For example, you put in $100,000 up front. Your Co-purchaser borrows $100,000. In 20 years time the Co-purchaser may have ended up paying $350,000 to repay the debt. You are still 50/50 owners.
Even though the Co-purchaser may end up repaying a lot more than the Up-front Contribution, that does not increase their Interest in the Property.
Your Syndicate may want to borrow on the security of the Property. That is fine.
A Co-purchaser may also lend money to the Syndicate or make a contribution to the Syndicate over and above their Upfront Capital Contribution.
This does not gain them a greater Interest in the Property; it is treated as an ‘arms length’ loan and again should be the subject of a separate agreement. Consider doing a Loan agreement or a Mortgage.
This document has been prepared by: Civic Legal