Ann and Joe are in their 40s and have decided to purchase a beach property with their friends, Rob and Jenny. Both couples will have the use of the property, and Rob and Jenny will need to borrow funds to complete the purchase. The couples and their children often go away together for summer holidays and have known each other since they were teenagers so they do not expect there to be any issues.
After a number of years Ann and Joe want out. They feel that they complete all the maintenance on the property, and Rob and Jenny never want to do or pay for any maintenance. The relationship between the couples has disintegrated and they are hardly speaking. The parties argue over who contributed what to the purchase and how the property is to be sold.
Parties are often on the best of terms initially, but with any shared ownership, disputes can occur later.
If the couples had entered into a property sharing agreement when they purchased the property, the agreement could have set out how much each party contributed towards the purchase and how the property is to be sold where one or both parties want to sell the property.
With the increase in property prices it is now more common for people to purchase a property together. It can provide a way of getting into the housing market or for investment purposes. For example, parents may purchase a property with their children, siblings may purchase a property together.
A property sharing agreement can record and both parties can agree on:-
- How much each party contributed towards the purchase.
- If there is a mortgage on the property securing a loan, who is responsible for repayment of the loan.
- Who is to live in the property.
- Who pays the outgoings (e.g. rates, electricity), insurance and maintenance, and in what proportions.
- What happens if only one party wants to sell the property.
- How the sale of the property is to be arranged.
- How are decisions to be made in relation to, for example, renovations, maintenance.
Entering into an agreement also means that the potential owners have a discussion about what their expectations are in relation to ownership of the property. Often it is not until these expectations are discussed that issues and/or problems can be identified and worked through.
It is important to note that a property sharing agreement does not deal with the division of property of married couples, de facto couples and civil union couples when they separate or when one of them dies. These issues are dealt with in the Property Relationships Act 1976 and specific advice on those issues should be obtained where relevant.
Co-ownership of a property requires careful consideration and completing a property sharing agreement when you purchase a property can minimise problems in the future.
This article is current as at the date of publication and is only intended to provide general comments about the law. Harkness Henry accepts no responsibility for reliance by any person or organisation on the content of the article. Please contact the author of the article if you require specific advice about how the law applies to you.