Co-Ownership Agreements – What You Need to Know
In the current housing market people are increasingly buying houses with others who are not their spouse or partner – such as parents, brothers, sisters, and friends. Peter Tatham, a Consultant at our Hornby Office, looks at these arrangements and how to protect your interests.
These arrangements are fine while people agree and get on, but what happens when, and if, they don’t?
We recommend that people have a Co-Ownership Agreement in place. This can, and should, include the following:
- In what shares should the property be owned?
- Who should live at the property?
- Who has contributed the deposit, or who has contributed what amounts towards it
- Who is paying the mortgage? This can be split up into different loans for different people. Bear in mind, however, that everybody is liable for everybody else’s loans so if someone doesn’t pay the others have to.
- Who is to pay the rates and in what proportions? This is usually the same as the ownership portions.
- Who is to contribute to maintenance and in what ways? Some may have skills they can apply to this, others may have to contribute money.
- Who is to pay for, or contribute towards, improvements to the property and how are these to be valued?
- What is to happen if someone wants to leave?
- What is to happen if the property is to be sold?
- What happens if one of the co-owners dies?
- What happens if you can’t agree and need to resolve a dispute between you?
Apart from saying that co-owners contribute in proportion to their ownership interests, the law has very little to say on the rights of co-owners between themselves.
The Property Law Act 2007 governs division of property among co-owners. If the property is worth $350,000.00 or less you can go to the District Court. If it is worth more than that then the High Court must become involved.
The Court can make orders for:
- sale and division of proceeds among co-owners; or
- the division of the property itself among the co-owners; or
- make one or more co-owners buy the others out.
The Court cannot order a subdivision. That has to be done under the Resource Management Act through the local council.
The Court considers:
- The extent of the share in the property of any co-owner.
- The nature and location of the property.
- The number of other co-owners and the extent of their shares.
- Any issues regarding hardship.
- The value of any contribution made by any co-owner to the cost of improvements to and maintenance of the property.
- Anything else that is relevant to the relationship.
A recent case outlining why co-ownership agreements are necessary is Weber v Henderson  NZHC 490, a decision of the Palmerston North High Court.
In that case, two single women with adult children (one of them also had a grandchild) bought a house together in Palmerston North. They contributed to this unequally but did not go on the Title in unequal shares. They had a mortgage to a bank which they contributed to unequally.
The problem was one owner brought a number of family members to live in the house without consent of the other owner. This included two adult daughters and their boyfriends, and a grandchild. One of the boyfriends was an alleged criminal on bail. There was violence towards the other co-owner, she was threatened with her life, locked out from some parts of the property, and had her property damaged. Eventually she moved out into temporary accommodation.
She applied to the Court for an order for sale, and an order that the occupiers vacate the property within 14 days.
The Court ordered the sale but refused to eject the occupants from the property as there was not enough evidence that they would not leave. The Court did reserve the co-owner permission to return to the High Court on an urgent basis.
Had there been a Co-Ownership Agreement in place it is unlikely this dispute would have ended up in the High Court, at considerable expense.
The cost of completing a Co-Ownership Agreement is always far less than trying to sort out a problem if anything goes wrong.
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