With housing affordability at an all-time low co-ownership is fast becoming the latest buzzword.

Jeremy Levitt, director PodProperty, a co-ownership specialist that has been pivotal in the smooth execution of thousands of joint purchases, welcomes the Federal Government’s decision to allow people who buy property together under a co-ownership framework to aggregate their First Home Saver loan accounts.

“This represents acknowledgement by the Federal government that co-ownership is a viable model in tackling the mounting housing affordability problem,” says Levitt.

Buying a home with others enables costs such as the purchase price, legal fees and stamp duty to be split between co-owners, making it easier and more affordable to enter the property market.

“With Treasury signaling its permission to join First Home Saver accounts together, first homebuyers may have a very serious weapon in their arsenal to combat worsening housing affordability,” declares Levitt.

The First Home Saver Account scheme will come into effect on 1 July.

Findings of a recent Mortgage Choice Franchise Owner Survey indicate that joint borrowing is becoming a trend in the property market leading Mortgage Choice National Corporate Affairs Manager, Warren O’Rourke to note that consumers wanting to enter the property market are starting to become more lateral thinking and look for options available to them.

Despite the successive interest rates hikes beginning to put the brakes on house prices, affordability remains a key issue for first homebuyers and Levitt congratulates the Rudd Government on “affirming co-ownership as a way of surmounting the crisis”.

Levitt, a former lawyer with commercial law firm Allens Arthur Robinson, co-founded PodProperty, Australia’s first service to assist groups of people to purchase property together as tenants in common within a secure legal framework.

PodProperty has forged an alliance with the Commonwealth Bank and Wizard Home Loans and is the exclusive proprietor of co-ownership services for a number of developers including Monarch Investments, a joint venture with Macquarie Bank.

Frustrated with the Howard Government’s lack of initiative regarding the dilution of the grants and stamp duty exemptions in co-ownership scenarios Levitt, who was instrumental in the NSW Government passing the First Home Plus One Scheme in May 2007, says the Federal Government’s First Home Saver Account scheme follows a trend that was initially introduced in New Zealand several years ago.

The scheme gives people paying no tax, or those on the 15 per cent or 30 per cent marginal tax rates, a $750 government contribution to their savings account for every $5,000 saved during a given year.

“Unlike the Howard Government’s First Home Owner’s Grant where the more joint buyers the less benefit each person has with respect to their grant, The First Home Saver Account scheme allows people to join their accounts together, which also means multiple Government contributions,” says Levitt.

The trap with co-ownership is not putting in place the necessary legal protection.

Levitt, says first home buyers entering the market together often forego a legal agreement because they think it’s too expensive but he stresses that putting a legal agreement in place when purchasing a property protects everyone’s interests.

A specially prepared PodProperty agreement makes use of a legal relationship between co-owners known as ‘tenancy in common’ at a tenth of the price a solicitor would charge.

There are two different ways of owning property. The first is joint tenancy, which is the traditional paradigm of property ownership. In this scenario if one of the couple dies the laws of survivorship take over so their share of the property automatically transmits to the other party. Under joint tenancy both parties together own the property but neither party owns a share in it.

Tenancy in common is analogous to owning shares. Each individual owns a stake in the piece of property.

“A number of complicated issues can arise from tenancy in common. Therefore a contract is required so the parties know their rights and obligations from the outset,” says Levitt.

There are now a number of innovative products in the market that make co-ownership less risky and give flexibility for the individuals involved to manage their affairs separately.

“But mortgage brokers need to be responsible and inform clients that if they’re going to be co-borrowers they need a co-ownership agreement,” maintains Levitt.