More first home buyers are buying with someone else: a partner, a sibling, a friend, or with a parent’s guarantee behind them. It is often the only way to get into the Melbourne market. It also creates a legal relationship that will outlast the purchase and, statistically, sometimes the friendship. A short agreement written at the start costs a fraction of sorting it out later.
Joint tenants or tenants in common?
How you are recorded on the title is the first decision, and it is not a formality.
- Joint tenants own the whole property together in undivided shares. If one owner dies, their interest passes automatically to the survivor by survivorship, regardless of what their will says. This suits most couples.
- Tenants in common own defined shares: 50/50, 70/30, or any split. Each share can be left by will, sold or mortgaged separately. This suits friends, siblings, and couples contributing unequally.
If you are contributing unequal deposits, tenants in common in proportionate shares is usually the right answer, and the shares should reflect the agreement you actually have, which may not be the same as the deposit ratio if one party is also paying more of the mortgage.
The co-ownership agreement
Title tells you who owns what. It does not tell you what happens next. A co-ownership agreement should cover:
- Contributions: deposit, stamp duty, legal costs, and how ongoing mortgage payments, rates, insurance and maintenance are shared.
- Occupation: who lives there, and whether an occupying owner pays rent to a non-occupying one.
- Improvements: who decides on renovations, who pays, and whether the spend adjusts the ownership shares.
- Exit: the important one. How much notice must someone give if they want out, how is the property valued, does the other owner have a first right to buy, over what period must they arrange finance, and what happens if they cannot.
- Default: what happens if one owner stops paying their share of the mortgage. Remember that the bank can pursue either of you for the whole debt regardless of your private agreement.
- Death and incapacity: what the surviving owner can do, and whether there is life insurance to fund a buy-out.
- Dispute resolution: mediation before anyone applies to court.
Without an agreement, a co-owner who wants out and cannot agree terms can apply to VCAT for the sale or division of the property under the Property Law Act 1958. That is a real remedy, but it is slow, costs money and usually ends in a sale neither party chose.
If you are buying with a partner
Couples often assume the Family Law Act will sort things out, and for married and de facto couples it largely does: property is divided on a just and equitable basis, not according to contributions or title. But that process is expensive and uncertain. A binding financial agreement, prepared with independent legal advice on both sides, can record how a property will be treated if the relationship ends, and is worth considering where one party brings substantially more to the purchase or where family money is involved.
Parental help: gift, loan or guarantee?
Each is different and the difference matters.
- A gift is straightforward, but lenders usually require a statutory declaration confirming it is not repayable. If the parents actually expect repayment, do not call it a gift.
- A loan should be documented, with interest (or explicitly none), repayment terms, and whether it is secured. An undocumented family loan is a common flashpoint in a later separation, where one side calls it a loan and the other a gift.
- A guarantee (typically a parent offering equity in their own home as additional security) is the most dangerous. If the borrower defaults, the guarantor’s home is at risk. Guarantors should get independent legal advice, and most lenders require it. Limit the guarantee to a specific amount and ask about the conditions for releasing it once the loan-to-value ratio improves.
Effect on first home buyer benefits
If you are buying with someone who has previously owned property, it can affect eligibility for the Victorian first home buyer stamp duty exemption or concession and the First Home Owner Grant, because the tests look at all purchasers. Similarly, the residency requirement applies to the qualifying purchasers. Check this before you decide who goes on the title, because there is no fixing it afterwards, and adding or removing a purchaser later can trigger duty. See our first home buyer guide for the wider picture.
Get it done before settlement
The agreement should be signed before or at settlement, when everyone is still aligned and cooperative. Asking someone to sign a co-ownership agreement two years in, when a disagreement has already started, rarely works.
We prepare co-ownership agreements and advise guarantors across Melbourne, with pricing disclosed before you engage us. Book a free first consultation.
Frequently asked questions
Do we need a co-ownership agreement if we are a couple?
It is less critical for married and de facto couples, because family law governs how property is divided if the relationship ends. It becomes valuable where contributions are very unequal, where one party’s family has provided money, or where you want certainty rather than a discretionary outcome, in which case a binding financial agreement is the usual vehicle.
Can one co-owner force the sale of the property?
Yes. A co-owner can apply to VCAT for an order for sale or division of co-owned land, and the tribunal will generally order a sale unless it would be unjust. A co-ownership agreement does not remove that right, but it can set out an agreed process that makes an application unnecessary.
What are the risks of guaranteeing my child’s home loan?
If the loan defaults, the lender can enforce against the security you provided, which is often the family home. Guarantors should take independent legal advice, cap the guarantee to a fixed amount rather than the whole loan, and ask the lender in writing what conditions must be met for the guarantee to be released.