Proper Documentation for Business

Brothers Charles and Henry embark on a business plan of buying and renting residential properties. The first is a family residence, with 2 tenants in the basement, but all of Charles’ and Henry’s family also occupy the property as a principal residence.  Their Dad and Mom, their wives and their collective 4 children, a total of 12 people including the tenants in 1 house. 

They take title as joint tenants (which means, if Charles dies, Henry owns the whole house with no credit to Charles, his wife or kids).

Clearly fraught with risk to say nothing of the possibility of brotherly discord or Canada Revenue Agency’s interpretation of “principal residence”.

Then Charles and Henry go on to buy 6 other houses, each in a machination of joint tenancy ownership and tenancy in common (which means, contrary to joint tenancy, each of Charles and Henry has a specific direct percentage ownership in each house and death of either of them doesn’t matter – his respective interest passes to his next of kin).

What were they thinking?  Well, first, do it on the cheap, presumably.  Then, “nothing will go wrong”; it’s family after all.

Well, that’s 3 recipes for disaster.  What should have occurred?

Get it all in writing right from the beginning.  Should have had accounting and legal advice.  When the inevitable occurs, the unwind costs and the process will definitely be both a multiple (possibly 10 x’s) of the costs of proper set up, but also total family discord.

Call us before you embark.

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