Buying a Home with a Friend in Ontario: Co-Ownership Agreements

Buying a home with a friend, a sibling or another relative can make ownership affordable. It also ties your money and your plans together. If one of you loses a job, wants to move or wants out, the answers are much easier to find when you wrote them down before you bought.

A co-ownership agreement is a contract between the owners. Much of what goes into it is a matter of agreement between you, not a fixed list set by statute. This article explains how title works in Ontario, what the agreement usually covers and where the law steps in if you have no agreement.

How you hold title comes first

In Ontario, when land is granted to two or more people, they are treated as tenants in common rather than joint tenants, unless the document clearly shows they are to take as joint tenants. This applies even if the owners are spouses. The presumption does not apply to executors or trustees.

In plain words, joint tenants have a right of survivorship, which means the survivor takes the whole property. Tenants in common each own a share that does not automatically pass to the other owner. For two unmarried buyers, the wording on the transfer should match what you actually intend, and the co-ownership agreement should say the same thing. A lawyer can confirm how the title should be written.

What a co-ownership agreement should cover

Think of the agreement as answering the questions you would hate to argue about later. Many co-owners start with money, then move to exit.

Why the exit terms matter

Anyone with an interest in land in Ontario may bring an action or application for partition of the land or for its sale. Joint tenants and tenants in common may be compelled to make or suffer partition or sale. In practice, that means one co-owner who wants out may be able to ask a court to deal with the property, even if the other owner wants to stay.

There is an exception for inherited land. Where land held jointly passed by will or intestacy, no partition proceeding may be taken until one year after the death. Whether a court will order a sale in a particular case depends on the facts, so it is worth getting advice before you rely on or fight a partition claim.

A clear exit clause can spare you that step. Many agreements set a buyout process, a way to value the home and a deadline for the remaining owner to arrange financing.

Partnership, bare trust and other side issues

Owning property together as joint tenants or tenants in common does not by itself create a partnership, even if the owners share profits from the property. A partnership exists where persons carry on a business in common with a view to profit. This matters because in a general partnership every partner can bind the firm and is jointly liable for all its debts and obligations. That general rule is subject to the limited liability partnership provision. If you plan to flip or rent out the home as a business, ask how that could change your position.

Sometimes one person goes on title for the other, for example to qualify for a mortgage. CRA describes a bare trust as one where the trustee is essentially an agent for the beneficiaries. Bare trusts do not have to file a T3 return or Schedule 15 for taxation years ending on or after December 31, 2024 and before December 31, 2026, but reportable bare trusts may have to file for years ending on or after December 31, 2026. The definition of a reportable bare trust excludes some arrangements, including a parent on title so a child can obtain a mortgage, and related persons holding a property that is their principal residence. These rules are changing, so confirm your own situation with a lawyer or accountant.

Before you sign: practical next steps

Ontario land transfer tax is payable when the transfer is registered, which happens on closing, and is generally based on the purchase price plus any mortgage or debt assumed. Eligible first-time homebuyers can get a refund of up to $4,000. Whether each of you qualifies is something to check before closing. Generally, a transfer of title must be signed for completeness by two different lawyers, although some transfers, such as those within a family or between related parties, may be completed by one lawyer acting for both sides.

• Agree on how title will be held and make sure the transfer wording matches.
• Write down each person's contribution and what it means for ownership and sale proceeds.
• Decide how costs are shared and what happens if someone misses a payment.
• Set out an exit process, including valuation and timing.
• Plan for death, incapacity, separation and new partners.
• Check land transfer tax and any refund for each buyer.
• Have each owner consider separate legal advice before signing.

Frequently asked questions