Before buying property with family or friends carefully consider
the potential risks as well as the benefits to avoid future
With the price of homes and other property soaring, it is
becoming more common for potential property owners to seek another
person to join with them to buy a property. This may be two or
three friends getting together to buy a house or business partners
buying their business premises.
Typically all goes well initially, however there are many traps
for the unwary. Problems may be avoided or minimised by the parties
entering into a prior written agreement at the time of acquiring
the property. This can be simple in form as long as all the
relevant issues are covered.
Parties intending to enter into co-ownership arrangements should
agree how they intend to deal with the various situations that may
arise and record their intentions and agreement in writing and this
should be signed by all parties. Preferably each party should take
independent legal advice that the agreement is fair.
The lender(s) may also require all owners to enter into an
agreement with the lender(s) to give reassurance to the lender(s)
that the mortgage security may be enforced in the event of any
default by any or all of the owners.
The types of issues that should be considered and agreed upon
include but are not limited to:
How is the property to be owned? For example, if one party
contributes 80% and another party 20% then they may wish to own the
property in those proportions.
If the parties own the property in different proportions,
should there be any limit on liability to pay the mortgage in
accord with those proportions? If this is not the case, the courts
may determine the ownership to be more equal due to the equal
liability of the parties to the mortgagee.
What is to happen if one co-owner wishes to sell?
Do the other co-owners wish a first right of refusal?
What is the price at which a co-owner may purchase the interest
of the other owner?
Who is to pay for ongoing expenses such as council rates, water
rates and repairs?
Who is to ascertain whether repairs are required or not?
What happens if one party fails to pay their contribution or
Is one or more of the parties to be entitled to exclusive
occupation of the property?
If so, what happens to any rental they receive from letting out
What happens if one co-owner moves out leaving the other to
live in the property?
What rental is to be paid for exclusive occupation, if
Who is responsible for maintaining gardens, cleanliness
What happens if the responsible party fails to keep the
property clean or maintained?
These are just some of the issues that may arise in a
Persons considering co-ownership should not be deterred by the
potential for dispute as with a little foresight, these
arrangements can work well and benefit all parties without
destroying their relationship.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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