Buying your First Home with Friends or Family…

According to a leading Chinese real estate business that has studied the rise in real estate prices in 45 countries, New Zealand has the world’s fastest-rising house prices.

This is not encouraging for first home buyers trying to secure a property. Pooling resources with family or friends is being looked at a lot more now as a viable means of getting on the property ladder. 

Two friends had been renting for two years and knew that their lifestyles and living arrangements were compatible.  They agreed that paying a mortgage was preferable to paying high rent. Both wanted to get into the property market but couldn’t afford to do it on their own. 

They decided to pool their resources and buy their first home together.  It is very important that in a situation like this friends (or family) enter into a Property Sharing Agreement.  This agreement clearly records matters relating to maintenance of the property, improvement costs, who would be responsible for certain costs associated with the property, what to do in the event of a dispute, and what to do if one party wants to sell their share.

Friends, family or business partners buying a property together most likely own the property as tenants in common.  This means that the title of the property records the share of each owner – they can be equal shares as in the case with these two friends (ie: a half share each in the whole property). 

The shares could also be unequal if two or more friends or family members buy a property together – it could be a couple with a parent, another sibling or business investor. Whichever way, the share apportionment generally reflects the financial contribution to the purchase.

Along with a Property Sharing Agreement to be documented at the time of purchase, the individual owners also need to make sure their new purchase is dealt with in their Wills.

This may all seem like a lot of extra documentation and additional cost at a time when purchasers are committing to the biggest financial investment of their life, but it is a relatively small investment to ensure foreseeable issues arising from shared living space are the subject of communication before any issues arise.