SearchTenants in common partnership
Yvette asks:
(updated on Thursday, November 26th 2015)
My brother and I are planning on buying a property (50-50) with two houses on it (one title). I plan to live in one of the houses while the other one will be rented. What is the best type of entity to purchase this property, so that I do not have to return income on the house that I am effectively living in while my brother gets income on the other house (and can claim expenses)?
Our Experts Answer:
I assume from your question that you wish to create an arrangement where you are effectively the beneficial owner of the dwelling and your brother is the beneficial owner of the rental despite the title showing you both as registered owners.
To achieve this, I would recommend a tenants in common partnership supported by a partitioning agreement. Each of you would determine the entity best suited to your own agenda and these two entities would settle the purchase and appear on the title as tenants in common.
To the extent that you each appear on the title you are holding each others share of the respective dwellings as bare trustees pursuant to the partitioning agreement. The partitioning agreement records that despite the shared ownership arrangement each party is the beneficial owner of the separate dwellings.
If the property were ultimately subdivided the resulting titles would be altered to reflect the split in the partitioning agreement. On this basis your brother would return all the rental from the rented house that he is the beneficial owner of and you would consider the dwelling simply to be your residence which is then unlikely to trigger a filing requirement for tax purposes.
If the titles are not to be subdivided your partnership agreement should consider issues like what happens in the event of death or divorce and should also include indemnity provisions given you will both be liable to an mortgagee.
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