What are property sharing agreements? What you need to know …

Carl and Sophie were first-home buyers with a small child, and struggling to find a home within their price range in a desirable area.  Sophie’s grandmother Merle lived by herself and the family was becoming concerned about her ability to manage on her own.

The family decided that it might be a good idea for Merle to sell her property and add her sale proceeds towards Carl and Sophie’s deposit, and the three of them could then purchase a house together. It seemed like the perfect solution.

Things went well until Merle’s health deteriorated and she needed to move into a rest home.  Sophie and Carl had made substantial renovations to the house, which involved some heavy borrowing from the bank and also a considerable amount of Carl’s labour.

The young couple did not want to worry Merle, but were concerned about whether they could afford their repayments if they had to borrow more to free up Merle’s share of the value the property. They also had no idea how to value the improvements to the property, or the time Carl had spent on the renovations.

During discussions with their lawyer about how to move forward it was pointed out that they should have had a Property Sharing Agreement prepared when they bought the house that would have avoided such confusion now.

Property Sharing Agreements are agreements between owners of a property as to various matters relating to the property, such as who pays outgoings (eg rates, insurance), what happens if one party wants to sell their share of the property, and how the property is to be valued in various circumstances.

Such agreements may become more common as house prices continue to rise in some areas, with family members and friends pooling their finances to buy the house they want.

Because circumstances inevitably change, it is important to think about a Property Sharing Agreement to cover situations that may arise in the future.  A minor investment at the right time will usually save a lot of worry and potential increased expense later.

If you would like to talk about a Property Sharing Agreement for your situation, call us on (04) 473 6850.