Many people turn to co-ownership arrangements due to the allure of owning recreational property in the interior of British Columbia. Typically the co-owners are family or close personal friends. Although there are many benefits to sharing property, most notably reducing the cost of owning property that is used sporadically, too many people enter into these arrangements without first exploring what the relationship between the co-owners will look like and then documenting the expectations of all of the parties. In my experience, if a dispute arises without the benefit of a written agreement, the co-owners often rack up legal fees that are collectively higher than the value of the property in question, not to mention doing harm to the personal relationship.
If you are thinking of entering into a co-ownership arrangement, a co-owners agreement drafted with the assistance of legal counsel can help militate against some of these risks.
Some of the important issues to discuss include not only how to share the purchase price and anticipated operating costs, but also how to share (and agree on) unanticipated costs or future renovations. Other major issues include whether one owner can transfer their interest without consent of the other owners, under what circumstances an owner will be forced to sell and how the use of the property will be divided. You should consider what rights, if any, will be granted to future generations or children of current owners. There should be clauses that set out precisely how to end the relationship and value the property.
Depending on the anticipated use of the property and the parties’ expectations, each agreement may contain vastly different clauses and relying on an off the shelf precedent may not be recommended.
There are other steps you should take to make the relationship run smoothly. Because you will be sharing costs and because an individual’s decision may impact other owners, it is recommended that the parties keep (and promptly disclose) invoices for costs they have incurred on behalf of the property. It is also important to engage in timely correspondence and, where possible, major decisions should be documented, even if only by email. Many disputes arise because of a failure to communicate in a timely and open manner and not because of the actual substance of the dispute. It is especially unfortunate when a family or friendship is impacted merely by the failure to include your other co-owners in a decision prior to making the decision.
Although a written co-owners agreement does not guarantee you will avoid future ownership disputes (or costly litigation), by setting out everyone’s expectations in advance, the co-owners agreement can sometimes save the relationship or, at the minimum, ensure that any resulting dispute is more focused and accordingly less costly for everyone involved.
In a future article, I will discuss how to end a shared property arrangement in cases where the parties have failed to enter into a co-owners agreement. Although it is recommended to have a co-owners agreement, there are options available to end the relationship with the assistance of the court.