Buying With Family or Friends in BC: The Ownership Structure Decides Everything Later

More buyers are purchasing with a parent, a sibling, or a friend, because two incomes and two down payments reach prices one of each cannot. The financing gets all the attention. The ownership structure gets five minutes at the lawyer's office, on the day of signing, when nobody wants to slow anything down.

That is the wrong order. The line on the title decides who inherits a share, how easily one owner can leave, and what it costs to change any of it later.

This article is general information about how these structures work in British Columbia. Every person buying together should get their own independent legal and tax advice before they sign, from a professional who is acting for them alone.

The two ways to hold title

When two or more people register a property in BC, they hold it one of two ways.

Joint tenancy. Every owner holds an equal share, and the title carries a right of survivorship. When one owner dies, that owner's share passes automatically to the surviving owners. It never enters the estate and it is never touched by the will. The survivors apply to the Land Title and Survey Authority with proof of death to have the title updated.

Tenancy in common. Each owner holds a separate share, and the shares can be unequal. One owner can hold 70% and another 30%, with those percentages registered on the title. When an owner dies, their share forms part of their estate and passes under their own will.

One registration detail matters here. In BC, joint tenancy has to be stated on the transfer document and on the title. A co-ownership that says nothing about which form applies is registered as a tenancy in common.

The difference that matters most

Everything above reduces to one question: where does a share go when an owner dies?

Under joint tenancy, it goes to the other owners, whatever the will says. Under tenancy in common, it goes wherever the will sends it.

Spouses buying together usually want joint tenancy, because that is the outcome they want anyway, and it avoids the delay of moving the home through an estate.

A parent helping a child usually wants the other answer. Picture a parent who contributes $300,000 toward a $1,100,000 purchase and goes on title as a joint tenant with one of their three children. If the parent dies first, that entire contribution lands with that one child, automatically, and the other two children receive nothing from it. If that is the intention, joint tenancy delivers it. If it is not, the family has created an unequal estate without ever deciding to.

Tenancy in common with the share written on the title keeps the contribution identifiable and lets the parent's will control it.

The gift letter

When a down payment comes from family, the lender wants it in writing that the money is a gift rather than a loan.

A loan is a debt. It would change the borrower's ratios in the same way any other monthly payment does, in the calculation described in our piece on the mortgage stress test. Worse for the lender, a family loan can create a claim against the property that sits alongside the mortgage.

A gift letter usually states:

• the amount and who is giving it
• the relationship between the giver and the buyer
• that no repayment is expected, in money or in any other form
• that the giver holds no interest in the property

Lenders normally want it signed by the family member, plus proof the funds actually landed in the buyer's account before completion. Money that shows up without a paper trail slows a file down at the worst possible moment.

There is a real tension here worth naming. A parent who wants their money back one day should not sign a letter saying it is a gift. The honest route in that case is going on title for a recorded share, which makes the parent an owner instead of a lender.

Why the lender wants everyone on the loan

Parents often ask whether they can go on title to help the child qualify, without taking on the mortgage.

Most lenders say no. Their security is the property. An owner who has made no promise to repay is a person with rights in that security and no obligation behind it, so the standard rule is that everyone on title is on the mortgage. Some lenders will consider an exception when the person staying off the loan gets independent legal advice, so ask the broker before you build a plan on it.

Then comes the part people miss. Being on the mortgage means joint and several liability. Every borrower is responsible for the whole payment, not for their share of it.

If your co-owner stops contributing, the lender does not chase them for their half. It looks to you for the full amount, and the missed payments appear on your credit file too. A co-ownership agreement can require your co-owner to pay you back. It cannot change what the lender is allowed to collect from you.

The co-ownership agreement

This is the document almost nobody writes and most co-owners eventually need. It is a private contract between the owners, separate from the title and separate from the mortgage. Six things belong in it.

Who pays what. The share of the mortgage payment, property tax, insurance, utilities, strata fees, and ordinary repairs for each owner. Say whether the shares match the ownership percentages or something else.

How decisions get made. Repairs and renovations. Set a dollar figure below which one owner can act alone, and a rule for anything above it. Say what happens when the owners disagree, such as mediation before anything else.

What happens if one owner wants out. Notice period, whether the other owners get the first chance to buy, and what happens if nobody can afford the buyout. Usually that ends in a sale of the whole property, and the agreement should say so rather than leaving it to a court.

How the buyout price is set. Name the method, never a number. An independent appraisal, or two appraisals with each side picking an appraiser and the price set at the midpoint. Include the payment deadline and who pays for the appraisals.

What happens on death. This has to match the title. An agreement promising a share to someone's children while the title is registered as a joint tenancy sets up a fight, because the survivorship rule operates on the title.

What happens if one owner cannot pay. A grace period, the right of the other owner to cover the payment, and how that advance is recovered later, whether as a debt with interest or as an adjustment to the ownership shares.

Property transfer tax on later changes

Changing who is on title is a registration at the Land Title Office, and that generally requires a property transfer tax return with tax payable on the fair market value of the interest transferred, unless an exemption applies.

The general rates are 1% on the first $200,000, 2% from $200,001 to $2,000,000, 3% above $2,000,000, and a further 2% on residential value above $3,000,000.

The tax applies to the share being moved. Adding one person to a 50% interest in a $1,000,000 home is a transfer of $500,000 of value, and the tax is calculated on that amount rather than on the full price. Exemptions cover some situations, including certain transfers between spouses. Ask a lawyer or notary before the transfer rather than after, because the return is filed at registration.

The practical consequence is simple. Getting the structure right at the purchase costs a conversation. Fixing it in three years can cost thousands. Our property transfer tax guide works through the rates and the main exemptions.

When one buyer has owned before

The first-time home buyers' exemption has a hard requirement: you must never have owned a registered interest in a property that was your principal residence anywhere in the world, and you must never have received this exemption before.

When two people buy together and only one qualifies, the exemption is reduced to the share held by the qualifying buyer. Two buyers holding equal shares where only one qualifies produces half of the exemption, not all of it.

A parent who already owns a home is not a first-time buyer, so a child buying with a parent on title receives the exemption only on the child's share. That is a real cost, and it needs to sit in the budget next to the benefit of the parent's income helping the file qualify.

Full exemption and partial exemption both run off the property's fair market value, and the thresholds have changed more than once, so check the current figures on the provincial page before you count on any of it.

The capital gains question

A home that is your principal residence can be sold without tax on the gain, for the years it qualified. The exemption works per owner, and it only covers years when the property was that owner's principal residence and someone in their family unit lived in it.

That creates a split in the usual family purchase. The child living in the home can shelter their share of the gain. The parent who co-owns but lives elsewhere generally cannot shelter theirs, because a family unit can designate only one property as its principal residence for any given year, and the parent's own home has already used that designation.

The parent's share of the gain is then a taxable capital gain when the property is sold or when their share is transferred. The amount depends on the value when they went on title and the value when they came off, which is one more reason to record the share and the date properly at the start. Dispositions are reported on the tax return, and claiming the principal residence exemption has required reporting the sale since 2016 even when no tax is owed.

Get a tax professional to run this before anyone signs. The number is knowable in advance, and it is worse as a surprise.

Buying a home with family or friends in BC: the key points

• Joint tenancy means equal shares and a right of survivorship, so a deceased owner's share passes to the survivors outside the will.
• Tenancy in common means separate shares that can be unequal, each passing under its owner's own will.
• A title that says nothing is registered as a tenancy in common in BC.
• Parents helping a child usually want tenancy in common with the share recorded.
• A family down payment needs a gift letter stating no repayment is expected.
• Lenders generally require everyone on title to be on the mortgage, and every borrower is liable for the whole payment.
• A co-ownership agreement must cover costs, decisions, exit, buyout price, death, and non-payment.
• Changing title later can trigger property transfer tax on the share transferred.
• The first-time buyer exemption is cut to the qualifying buyer's share.
• Each party should get independent legal and tax advice, from their own professional.
• Contact our team to talk through a purchase with a co-buyer, or browse listings in the range two incomes reach.

Plan your next step

Work through search preparation with your co-buyer before you speak to a lender, so both files are ready at the same time. If the shortlist includes apartments or townhomes, strata review covers the documents that affect what each owner pays every month.