Navigate the complexities of co-owning property post-relationship with expert insights. Explore legal and financial considerations, draft a robust co-ownership agreement, manage expenses, plan for the long term, and address tax implications. Ensure a harmonious arrangement with open communication. Consult this comprehensive guide for sound advice, and remember to seek personalized guidance from professionals to safeguard your interests.
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“About a year ago my partner and I bought our first home – a 2ha bush block with small unconsented cabin on it. It is very private and has epic views of one of NZs most beautiful beaches. It is about an hours drive from the nearest decent sized city.
We paid just over 500k and our joint income is about 160k. Mortgage about 300k and $250 each a week (ish).
We have decided we are not right for each other, and are calling it quits.
We are exploring ways of keeping the property and sharing it. The property is unique in this price bracket and the way the world is, we don’t see having this place as a bad idea – property prices down, impending doom etc. The garden is growing, the hens are laying, and I can fish down the road.
We are talking about 3 months on, 3 months off. Perhaps 6 months. It is a big enough property that we could build another small cabin so neither of us would ever be homeless.
We know there are a lot of “what ifs” involved. Are we naive? Could that ever work? We will get advice on this too but was hoping someone might have gone through something similar. Thanks!”
(Original question on Reddit)
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This is a complex situation but here are some general insights and considerations for your situation. It’s important to consult with professionals for advice tailored to your specific circumstances.
Legal and Financial Advice:
It’s wise to consult with a lawyer and a financial advisor to understand your options and obligations. They can guide you through the legal and financial aspects of co-owning property, especially when you’re not a couple anymore.
Co-ownership Agreement:
If you decide to share the property, you should draft a detailed co-ownership agreement that outlines the responsibilities, rights, and expectations of each party. This should include provisions for property use, maintenance, and expenses.
Property Management:
You’ll need to decide how you’ll manage and maintain the property during the months when one of you isn’t living there. Will you hire someone, have a caretaker, or rely on each other?
Expenses and Income:
Discuss how you’ll handle property-related expenses like the mortgage, property taxes, utilities, and maintenance. It’s also essential to agree on any potential rental income if you decide to rent it out during the months you’re not using it.
Exit Strategy:
Plan for the long term. What happens if one of you wants to sell their share in the future? Can the other partner buy them out, or will you need to sell the entire property? A clear exit strategy can prevent conflicts down the road.
Property Improvements:
If you’re considering building another cabin, discuss who will cover the costs and how ownership will be divided. This should also be addressed in the co-ownership agreement.
Tax Implications:
Changes in property ownership can have tax consequences, so consult with a tax professional to understand the potential impact on your financial situation.
Insurance:
Ensure that you have the appropriate insurance coverage for the property, including liability insurance. If you rent the property, you may need additional coverage.
Communication and Flexibility:
Maintaining open and effective communication with your partner is crucial. You may need to adjust your plans and arrangements as circumstances change.
Remember, co-owning a property with someone you’re no longer in a relationship with can be complex and may lead to challenges. Be prepared for the “what ifs” and consider seeking mediation or counseling to address any issues that may arise.
Ultimately, it’s essential to make informed decisions and prioritize a harmonious and mutually beneficial arrangement that safeguards both parties’ interests. Consulting professionals with expertise in real estate, law, and finance is key to achieving that goal.
Hope this helps.
Regards, Clive Fernandes (Financial Adviser)
Director – National Capital
Disclosure: I am the director of National Capital, a KiwiSaver advice firm. The views expressed in this article are the views of the author. The information provided is of a general nature and is not intended to be personalised financial advice. You may seek appropriate financial advice from a Financial Adviser to suit your individual circumstances or contact National Capital.
