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Teaming up to buy property...

Housing affordability is an issue, especially in Queenstown.


Is therefore quite common that people will pool resources to enter the property market. The philosophy being that its better to be in the market than not. Once you’re in the market you can roll with the market.


But if you’re not in it then it's just going to get harder and harder. You’ll be on the outside looking in. And then you’ll leave town, which is a real shame for the community. The community needs people to establish themselves here, and for most people that means home ownership.


People teaming up to own property is nothing new.


You can invest in property syndicates to own commercial property. Plus there are vehicles such as listed property trusts which you can invest in to get an exposure to property.

We want to talk about something more fundamental though – home ownership, and the increasingly common situation where two or more people buy a property together.


Property Sharing Agreement


Specifically, we want to talk about the importance of having an agreement with your co-owner.


The reason an agreement is so important is because, really, most people don’t want to be a co-owner for ever, so somewhere along the way one or other of the co-owners is going to want out. And if there is no agreement in place that can get very messy. Friendships can be destroyed over this.


What does a Co-Ownership Agreement need to cover?


There are some fundamental things it needs to say:


  1. How much is each partner putting in?

  2. How much are they going to borrow from the bank?

  3. Should there be an obligation to keep the arrangement in place for a period of time rather than one of the partners wanting to sell straight away? This could be particularly relevant now that we have a brightline test which taxes gains on properties sold within two years.

  4. Will they share the obligation to pay outgoings like rates, insurance and maintenance costs in proportion to their share?

  5. What happens if someone doesn’t pay their share when they’re supposed to?

  6. What happens if one of the partners is living in the property but the other isn’t? Will the arrangement be any different? What if the resident partner is hands on with maintenance for example?

  7. What is the process if a partner wants out? What period of notice must they give the other partner? How is the outgoing partner’s share in the property to be valued? What if the remaining partner doesn’t want or can’t afford to buy the outgoing partner’s share?

  8. Should the arrangement have a “sunset” date after which it should be reviewed?


These are all good questions. Why is it then, that people leave this to chance?


Yes, there are provisions in the Property Law Act that deal with situations where one party wants out. But you will have to go to Court if you want to use them. That costs money.

Not only that, but it basically means that you are leaving your financial position in the hands of the court. The court can order the sale or partition of the property, or not. It can force one or other co-owner to buy out the other co-owner. Or not. It can even fix the price, or order compensation to one or other co-owner.


There are a whole lot of factors that the court can consider including:


  1. What is the applicant’s share in the property

  2. What type of property is it and where is it located

  3. How many co-owners and what share do they each have

  4. Would there be “hardship” to the applicant if the court doesn’t make an order

  5. How much did each co-owner put in

  6. Any other matter the court thinks is relevant


The court has already shown that it would be reluctant to force a co-owner to sell against his or her wishes. So if you leave it to the court to decide your fate not only is is going to cost you, but you might not get what you want.


At Queenstown Law we can help you get a clear, simple agreement in place so there are no surprises later. Things are always good at the start, we know that. Its only later that things can sometimes go pear-shaped. So get an agreement in place at the start, rather than leaving it to chance later.


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