Property Sharing Agreements
When and why you need them?
A Property Sharing Agreement is a contract created between two or more owners of a property. This type of agreement is common where friends, family or business colleagues intend to purchase a property together and wish to have all partys’ rights and obligations recorded. A Property Sharing Agreement is a great way to maintain relationships between owners and avoid unnecessary aggravation and costs arising from potential disputes.
Commonly covered areas include:
- the shares of each owner and the form of ownership to be recorded on the certificate of title to the property;
- how the parties are to contribute to property expenses, outgoings and maintenance;
- processes by which individual owners may sell their share of the property;
- method of dispute resolution; and
- any joint and several obligations under any mortgage.
A Property Sharing Agreement can help to reduce the financial risk of co-owning a property if the relationship between owners breaks down especially where the co-owners’ contributions towards the property are not equal. If a co-owner defaults on loan obligations or wishes to sell the property co-owners can turn to the Property Sharing Agreement and enforce the obligations contained in it.
We always recommend that individual owners should obtain independent legal advice before signing such an Agreement but there is no statutory obligation in that regard. Preparation by us of an Agreement is an additional cost at the time of purchase (which can be off-putting) but such an Agreement can be extremely valuable, in the future, if a dispute arises (almost like an insurance policy).