Co-Buying a Home in Ontario With a Friend or Family Member: Legal Issues to Know First

With Ontario home prices as high as they are, many first-time buyers are pooling resources — buying with a sibling, a close friend, or a parent — to get into the market sooner. Co-purchasing can make genuine financial sense. But the legal relationship between co-owners is more complex than most people realize when they first shake hands on the idea. Without a clear written agreement, a future disagreement can become expensive and difficult to resolve.

This article explains how co-ownership works under Ontario law, the key decisions you need to make before closing, and why a co-ownership agreement is not optional.

Two Ways to Hold Title Together

When two or more people buy a property in Ontario, they must decide how they will hold title. There are two options.

Joint Tenancy

Joint tenancy means each owner holds the entire property together, without a divided share. The defining feature of joint tenancy is the right of survivorship: if one owner dies, their interest automatically passes to the surviving owner(s) — regardless of what the deceased's will says. The property does not go through the deceased's estate; it passes by law.

Joint tenancy is common for married couples and common-law spouses who want their ownership interest to pass automatically to their partner. It is less appropriate for friends or business-like co-purchases where each party wants their estate to inherit their share.

Tenancy-in-Common

Tenancy-in-common means each owner holds a distinct, proportional share of the property. Shares can be equal (50/50) or unequal (60/40, 70/30, etc.), depending on what the parties agree. If one owner dies, their share passes to their estate — to whomever their will designates, or if they die without a will, through Ontario's intestacy rules.

For friends, siblings, or unrelated co-buyers, tenancy-in-common is almost always the more appropriate structure. It allows each person to contribute a different amount to the down payment, hold a proportional share, and have their share pass to their own heirs.

The ownership structure must be specified in the deed. Once registered, it can be changed, but doing so requires legal steps. Decide before closing.

Why You Need a Co-Ownership Agreement

The deed tells the world that you both own the property. It does not say:

• Who pays which portion of the mortgage, property taxes, insurance, and maintenance
• What happens when one owner wants to sell and the other does not
• How you handle capital improvements and who gets credit for them
• What process applies if one owner stops paying their share
• Whether either owner can rent out their portion of the property
• What happens if one owner dies, becomes incapacitated, or goes bankrupt

A co-ownership agreement (sometimes called a co-habitation agreement if the owners also live together, or a co-purchaser agreement) is a private contract between the owners that answers all of these questions in advance.

It is not filed with the land registry — it is a private document between you. But it is legally binding between the parties.

What a Good Co-Ownership Agreement Covers

• Ownership shares and how they were calculated (based on down payment contributions, for example)
• Ongoing cost-sharing: who pays what percentage of the mortgage, utilities, taxes, and insurance
• Decision-making: does one party have a casting vote on maintenance decisions, or is consensus required?
• Exit rights: if one owner wants to sell, must they offer the other a first right of refusal? At what price?
• Forced sale provision: if the parties deadlock, does either have the right to compel a sale?
• Improvements: if one owner funds a major renovation, how is their contribution recognized?
• Default: what happens if one owner stops paying their share? Is there a cure period? Can the other owner buy them out?
• Death or incapacity: what are the estate's rights if one owner dies?

Without this agreement, disputes go to court under the Partition Act — Ontario legislation that allows any co-owner to force a sale of the entire property. Litigation is expensive and takes time. A co-ownership agreement can specify an alternative dispute resolution process (negotiation, mediation) before anyone goes near a courthouse.

Mortgage Considerations for Co-Buyers

Most lenders will require all co-owners to be co-borrowers on the mortgage — meaning all parties are jointly and severally liable for the full debt. This has consequences:

• Credit and income: all borrowers' financial profiles factor into qualification. A co-buyer with a lower credit score or high debt may reduce the amount you qualify for.
• Stress test: all income is combined, but all debts are also counted.
• One party leaving: if one co-buyer wants to leave the ownership arrangement, they typically cannot simply remove themselves from the mortgage without the lender's consent, which usually requires refinancing.

Discuss this with your mortgage professional before assuming the structure is simple.

Tax Implications

Co-ownership has tax implications that vary depending on whether you are using the property as a principal residence or partially as a rental:

• Principal residence exemption: if both co-owners live in the home as their principal residence, each may claim the exemption on their share when the property is sold, sheltering capital gains. If only one owner lives there, only their share may be exempt.
• Income from renting a unit: if the co-owners rent a portion of the property (e.g., a basement unit), rental income is allocated proportionally and each owner reports their share. This can affect principal residence claims.

Get advice from a tax professional before finalizing the co-ownership structure, particularly if one owner will not be occupying the property.

Frequently asked questions