Property sharing agreements – a great way to protect yourself in a co-ownership arrangement

As property prices continue to trend upwards, we are seeing more purchasers than ever considering inter-generational living, buying with a sibling or friend, or being helped out by parents or grandparents.  

While these creative options for ownership are assisting people enter the property market, there are a myriad of issues that can arise if the parties have not set out the terms of their arrangement at the beginning. 

We have set out examples of common disputes that we have observed arise, below:

(a)       Sisters, Aroha and Lucy, purchase a property together
After some time, Lucy, who is in a serious relationship, wants to sell her share in the property so that she can buy a property with her partner.  Aroha doesn’t want to sell the property, but she also doesn’t have the funds available to buy out Lucy.  What next?

A property sharing agreement can record what happens if either party wants to dispose of their share of the property at any time. 

(b)       Friends, Jamie and Nikau, purchase a property together
The friends live together in the property for five years, after which they mutually decide to renovate the property and sell it.  Nikau is a builder and completes substantial renovations on the property prior to their putting the property on the market.  Nikau does not discuss with Jamie his expectations to be paid for the work he completes on the property and subsequently the friends fall out over monies received from the sale.

A property sharing agreement can record how a party is paid for any works they carry out on the property.

(c)       Mia and her husband Sam are looking to buy their first home, they have also just had their first child. Mia’s grandmother Mary is in deteriorating health.  Mia, Sam and Mary decide to pool their savings to buy a property together
The parties have an expectation that the arrangement be mutually beneficial, as it will delay Mary’s transition into rest home care, with more assistance at home, and Mary’s contribution will bolster the deposit Mia and Sam were required to have to purchase their first home. 

Unfortunately, Mary passed away shortly after the settlement of the property.  There was no written agreement in place, and this resulted in delays for the administration of Mary’s estate while the executor ascertained exactly what Mary’s contribution was.  The delays further caused tension in Mia’s extended family. Sam and Mia could not retain the property as they did not have the funds to buy out Mary’s share from her estate.

In all of these scenarios, it would have been advisable for the purchasers to enter into a Property Sharing Agreement.  A Property Sharing Agreement sets out each parties’ intentions, rights and obligations in respect of the property.  These agreements generally include:

1.    Who will own the property;

2.    Arrangements for selling a party’s share in the property, including how you value that share;

3.    Agreement regarding what happens if one party dies, enters into a relationship or separates;

4.    Who pays the mortgage, outgoings, utilities and maintenance of the property.

The Agreement can be a vital investment that may well turn out to be very important to you in the future. All too often it is very difficult for parties to agree on what is fair further down the track, once a dispute has arisen.

Leading law firms committed to helping clients cost-effectively will have a range of fixed-priced Initial Consultations to suit most people’s needs in quickly learning what their options are.  At Rainey Collins we have an experienced team who can answer your questions and put you on the right track.