Co-Ownership

If you are considering purchasing real estate with other people, you will find the co-ownership models discussed in this chapter to be particularly relevant. Each model of ownership reflects a different set of values, and confers certain economic and financial rights and obligations in terms of use of the space.

While you examine the different models, think about the values that you would bring to a co-ownership agreement. For example, if you are interested in ownership because you value stability and are not overly concerned about profits, would your co-owners share these values? Or, do they value achieving a return on their investment, and plan to sell the building if the real estate market turns hot and a substantial return is guaranteed? Thinking about these issues is imperative if you are considering co-ownership.

The following questions will help you define your personal values when it comes to owning property and living or working with others:

• Should there be collective control over who occupies the space?
  
• Should the price for new owners remain affordable over time? Or should it reflect market trends?
  
• How should conflicts be addressed?
  
• How can joint decision-making be achieved?
  
• Should the property be exclusively owned and maintained by the occupants?  Or should you hire a management company?
  
• To what extent will each owner accept financial liability for the other owners?
  
• Will the property accept renters?
  
• What type of live/work or work-only is allowed in the space?
  
• How much do you need to know about each other's financial situation, credit history, etc.?
  
• What skills or attributes (property management, maintenance, fundraising) do the others bring to the table?
  
• Are your uses -- art production methods, space needs, administrative abilities, etc. -- compatible?

In addition, you and the other potential co-owners should jointly discuss your values, expectations and intentions for the enterprise. When everyone has come to an agreement on these issues, you should seek legal assistance to help you design a legal structure that most closely fits these expectations and meets your needs.

The legal documents must clearly spell out the requirements, consequences for actions, rules of conduct, rules for arbitration and other stipulations. You never know what will happen in the future. For a list of documents you will need in order to legally create each model, review the Business Models Comparison Chart.

A group can purchase property as tenants-in-common or joint tenants, form a corporation or limited liability company, or set up a cooperative or condo. A lawyer can help you to decide which form of ownership is best-suited to your particular situation, which type of co-ownership agreement you need, and your potential liability in each case. With the assistance of an accountant, an attorney can also advise you on the personal and business tax implications of each model.