Co-ownership, also called joint ownership, is when a group of people own the legal title to a particular property and own all the beneficial interests in that property.
A good example is when two or more people contribute money to buy a property, thereby enjoying the legal title and all beneficial interest in that property. It is also a legal structure that allows multiple investors to jointly own real estate or a portfolio of assets by pooling resources and sharing the benefits and development risks of real estate acquisition.
There are two main types of co-ownership in Nigeria: Joint Tenancy and Tenancy.
1. Joint Tenancy: This is a co-ownership structure whereby the title and interest in the property are held in equal proportions by the co-owners, also known as joint tenants.
For instance, Olu, Ade, and Tony all contributed an equal amount of ₦500,000 (Five Hundred Thousand) each to own a property worth ₦1,500,000 (One Million, Five Hundred Thousand Naira). In this structure, each joint tenant makes a matching contribution and has a beneficial right on that property with a right to occupy the property concurrently.
The main feature of this kind of tenancy is the right to survivorship. When one joint tenant dies, the legal and beneficial ownership of the deceased in that property is automatically transferred to the surviving joint tenants and not to the deceased estate or families.
2. Tenancy in Common: This is a co-ownership structure whereby the title and interest in the property are held in unequal proportions by the co-owners also tenants in common. For instance, Olu, Ade, and Tony all contributed an unequal amount of ₦500,000 (Five Hundred Thousand), ₦200,000 (Two Hundred Thousand), and ₦800,000 (Eight Hundred Thousand) to own a property worth ₦1,500,000 (One Million, Five Hundred Thousand Naira). In this structure, each tenant in common has made an unequal contribution to that property and has a beneficial right on that property according to their contributions.
There is no right of survivorship in this co-ownership structure, as each tenant in common has a separate fractional interest in the property. Hence, a tenant can sell his share at any time and to anyone, and where a tenant in common dies, the claim can be passed to a third party (beneficiaries, spouse, children, etc.). Also, there is no limit to the number of individuals who can hold title to one piece of real estate in this co-ownership structure.
While there are numerous advantages to the co-ownership structure, some risks are attached. Let us take a look at the pros and cons of co-ownership.
Co-ownership has various fantastic and exciting advantages, and some of them include:
- It is a cheaper option: It is a cost-friendly way of breaking into real estate and co-owning real estate assets because each person pays their share of the total cost of the property rather than an individual bearing the cost of acquisition alone.
- Access to rents and profits: Each co-owner is entitled to a share of the total revenue generated from the property.
- An excellent way of accumulating wealth: Each co-owner builds wealth by securely expanding their asset portfolio by owning fractions of multiple real estate assets and enjoying capital appreciation, rental income, or both.
As much as the advantages sound exciting, there are some risks.
- Co-ownership arrangements can be tricky: Before investing in one, you should seek legal guidance to understand precisely what you’re getting into.
- Disputes with the law
While there are risks attached to co-ownership, the benefits outweigh the disadvantages. It is one of the numerous reasons Ellamediate has created a platform to enable everyone co-own assets across different jurisdictions and also enjoy the benefits of co-ownership.
What is preventing you from jointly owning assets today?