What to watch for in the shared equity scheme ⚠️
It was a welcome and basically common sense announcement in the budget where the eligibility criteria for the government assisted (or shared equity) home buyers scheme was expanded from previously only being available for married or defacto couples… in current times, it makes far more sense to open this up and it is now to be available for siblings, friends… hell probably even strangers with a mutual goal and that is FANTASTIC!
It’s hard enough getting your foot into the market these days, so to now have even more flexibility about HOW you can do this is welcome news I’m sure. BUT… what I want to discuss today is how to prevent a sh*t ton of stress and money down the track if one of the property partners wants out…
I recently was involved in a sale where the property was co-owned by friends. As in life, friendship dynamics change and new job locations, new relationships come in to reality - so the circumstances of one of the friends changed substantially… what happens with the house?
In this recent situation, one of the friends wanted to buy the other out but with rate rises etc, this was unfortunately not possible, so the house ended up on the market for sale. But the niggly bits were still there - who got what share of the proceeds? One party had paid more one had paid less one had lived in the property longer… the list went on.
When emotions are at their highest (same can be said in divorce / separation situations), negotiations and discussions around what is to happen and how things are to be divided are happening when everyone is at the highest stress rate - and this is where things can sour very very quickly.
Now, I’m not a lawyer, and this is by no means legal or financial advice - rather a statement in common sense - set up the parameters BEFORE you sign a contract to purchase a property together!
Essentially it’s like a prenuptial agreement, but for a property, not a marriage.
It should set out all scenarios of who gets what and how the process will happen should one or both of you want/need to exit the property partnership.
If you are looking at taking advantage of this scheme - go do it - it’s an awesome opportunity! But please, do it with a plan in place!