Common law and condo investment

[WaltGeorge]

Here is a question. My son wants to move in with his girlfriend and buy a condo. Here is the tricky part. He got some money from his parents and his share of the downpayment will be 75 % while hers is only 25 %.They both will hold the title to the property and pay half of the mortgage payment as well as half of all living expenses.
I recommended to them to sign an agreement that in the case of a break up or in case they are selling the condo, the profit of the sale should be distributed to both of them in the same relationship of the downpayment (3:1).

Any recommendation how to best handle the situation? Do we need a lawyer? Does a standard written and signed agreement do it as well?

Thanks

[Rioe]

If they're to split the future expenses 50-50 and not 75-25 like their downpayment, then a 75-25 split upon breakup or sale of the condo would not be very fair, especially if they end up together for a long time. A fairer agreement would be for them, upon breakup or sale of the condo, to each get their downpayment back, and then half the increase in value. This still isn't perfectly equal, but it's an improvement. This stuff gets complicated fast!

An even better idea may be to have a complete cohabitation agreement drawn up. Nobody thinks they will ever need one, but having one can avoid a whole lot of headaches later on during a very stressful time. To be legal, each of them must have an independent lawyer go over it with them before they sign it.

[dinkyface]

If they are sharing mortgage payments 50-50, then after a few years have passed, that 3:1 split will become unfair to her, because their total contributions will approach 1:1.

It would be better to say that when sold, the DP amount is split 3:1, and the remaining amount is split 50:50.

Note that if the market value has doubled (for example), then the non-DP amount might be quite large, relative to the original DP amount. He might argue that the DP amount to be split should be adjusted i.e. doubled in this case.

They still have an issue that if one party wants out, the other party will have to agree to buy them out, possibly having to re-mortgage, and possibly may have trouble qualifying for mortgage singly.

[billm]

Another idea is for him to put down the same amount as her, and for him to invest the rest of his money elsewhere. Alternatively, she could borrow more money for the down payment (in her name and not a lien on the condo), such that her down payment is the same as his.

That way it is all 50/50 when it comes to the condo.

What ever you do, get it in writing and make it fair, meaning to treat it as a business arrangement.

[whatnext]

good idea to get a co hab agreement. as I am discovering the legal costs sorting out commonlaw property division are unbelievably costly because they are not straightforward.

[WaltGeorge]

Thanks for the response, I agree with the arguments regarding the 3:1 split. sure I hope they stay together and there will be no split at all. But nobody knows.
Maybe an agreement is the best solution.

[pmmpa]

For those who don't know, a cohabitation agreement is a written agreement between two unmarried adults that can deal with things like support (under the Family Law Act, for example) and ownership and division of property. Having an agreement can help sort out the rights and obligations of parties during and after the cohabitation.

Without one of these agreements, trying to sort out who is responsible for what and who owns what can be tricky: it will generally depend on legal ownership. But statutes can also have a role to play (e.g. Succession Law Reform Act for dependants). Also, judge-made rules such as trust, equity (unjust enrichment) and the common law can also affect you. To avoid the costly and emotionally draining experience of fighting over things like support and property in the future, it's best to have a Cohabitation Agreement.

If you're looking for a Cohabitation Agreement that avoids creating financial obligations, then check this website out: Dynamic Lawyers. For a fraction of the cost a lawyer would charge, you can purchase a Cohabitation Agreement that either terminates upon marriage or which survives past marriage. The form is lawyer-prepared, customizable, and comes with free guidance (video tutorial and written guides).