Massons

The art of co-ownership: how to buy your weekender with friends, with confidence

Written by Jodie Masson on January 27, 2017

The smart way to buy your weekender and keep your friends

It’s that time of year when we all take a break from our stressful jobs, and travel to places more peaceful than our own. We start to reassess our priorities and think about spending more time with our families.

Maybe it’s time to buy a weekender? A place to get away from it all regularly. A home away from home.

But the problem with buying a weekender is that it’s a huge expense – not only the initial acquisition of that beachside property, but also the ongoing maintenance costs and rates (which are usually not tax deductable). In addition, the reality is that it’s unlikely, after the initial “honeymoon period”, that you will use it every weekend and every holiday.

The ongoing maintenance (eg cleaning and lawn mowing) can also be a drain on families who are already time poor – do you really want to be spending your week maintaining and cleaning one house and your weekends maintaining and cleaning a weekender?

It might be time to think about co-ownership.

Co-ownership is essentially owning a property with others. In the context of a weekender or holiday house, it’s a very useful structure as it allows people to pool their money to buy and manage an asset that they may not have otherwise been able to afford. It allows several families to share the burden of ongoing rates and charges, maintenance and cleaning. In most structures, it means that the weekender is used more regularly as people visit less often and tend to value their “allocated time”.

A co-ownership structure is analogous in many ways to a strata scheme (in the sense that it involves many owners working together to make decisions about a jointly owned property). However, whilst a strata scheme sits within a comprehensive legislative framework that governs the relationship between co-owners, a co-ownership structure does not. You need to specially contract to establish the “ground rules” as, unlike strata, there is no specific legislation to save you if things go wrong. It is very important to have a comprehensive co-ownership deed which sets out the legal contract between the various co-owners.

We have set up and worked with several co-ownership structures, both for enormous and complicated commercial properties and for smaller “weekender” style assets. Specialised skills are required to set up a functional and peaceful co-ownership scheme. It pays to get it right from the very beginning.

In the context of a weekender, the co-ownership arrangements that we have seen work well all cover the following key areas:

  • Allocation of use of the property between the owners (usually by way of a yearly roster) ensuring that each “special” period (eg Christmas, Easter, long weekends) is rotated fairly
  • Insurance, indemnities and risk
  • Maintenance, repairs and cleaning (what will be outsourced and what will the owners will do themselves?)
  • “House rules” that apply equally to owners and visitors (eg pets, storage of personal items)
  • Furniture and other jointly owned house and pantry items
  • How costs are shared (preferably by way of an administrative fund and sinking fund held in a separate bank account)
  • Annual meetings and processes for decision making. Will one share equal one vote? Are some decisions so important that they should be unanimous?
  • Who is responsible for key areas (eg administration (managing the roster and mail), paying rates and other bills, organising tradesman)?
  • What happens when an owner wants to sell their share? Will owners have a right of first refusal to buy each other out? What happens if an owner dies or becomes insolvent? Can an owner mortgage their share?
  • Is holiday letting permitted? How will it be managed? How will the income be distributed?
  • Will a caveat be registered on title to notify purchasers of the existence of the co-ownership structure?
  • And most importantly… dispute resolution! What happens if the owners can’t agree?

A co-ownership deed needs to be properly constructed to be enforceable by the original owners, and any subsequent co-owner. It needs to have “running covenant” clauses so that it will always apply to the property, even where one or more owners try to avoid its operation. It needs to be a document that an owner is able to rely on if they need to take legal action, in court if necessary, against a co-owner for a failure to comply with the co-ownership deed.

In a well-managed co-ownership scheme, serious disputes rarely happen as the co-ownership deed articulates the pre-arranged agreement between the owners. It operates in practice like a strata scheme – where meetings are held annually, owners follow the pre-agreed rules and the costs associated with owning and maintaining the property are properly budgeted for and properly shared.

Now…. maybe that weekender is not such a bad idea after all?

Insights

Location or amenities: leveraging the benefits of your commercial listing

To assist in leveraging the benefits of commercial listings, the REINSW has recently published an article in which our Ole Mitrevski provides some insights into what businesses prioritise when looking for commercial space

Read the article here – Locations or amenities: leveraging the benefits of your commercial listing

February 15, 2019

Adverse Possession

Our very own Ben Malone recently appeared on ABCNews24 last week chatting all things “adverse possession”.  This was a hot topic in the press following a very interesting (and unusual) adverse possession case relating to a property in the Inner West in NSW (see article in the link below for more details):

Sydney property developer awarded home under squatting laws

November 5, 2018

Strata Renewal update

The Owners – Strata Plan 49574 v Scorpio Holdings (Aust) Pty Ltd & Ors

Another strata renewal hits the Land & Environment Court, and it becomes apparent that:

  • a security for costs application under rule 42.21 of the UCPR will not be available to a dissenting lot owner in strata renewal proceedings; and
  • – applicants are entitled to require dissenting owners to properly “state their case” and provide particulars of compensation early in the proceedings

Read the full case here – https://www.caselaw.nsw.gov.au/decision/5ad6918fe4b074a7c6e1e417

 

 

 

May 4, 2018

Doyle's Guide - 2018

We are delighted that Massons has been listed in the Doyle’s Guide of “Leading Property & Real Estate Law Firms – NSW, 2018 and that both of our partners, Jodie Masson and Leisha de Aboitiz have been listed as “Leading Property & Real Estate Lawyers – NSW, 2018”. Doyle’s Guide is compiled using “online peer-based surveys as well as extensive telephone and face to face interviews with clients, peers and relevant industry bodies” so a big THANK YOU must go out to our wonderful clients and our respected peers in the legal industry – thank you!

http://doylesguide.com/leading-property-real-estate-lawyers-nsw-2018/

http://doylesguide.com/leading-leasing-lawyers-new-south-wales-2018/

Leading Property & Real Estate Law Firms – NSW, 2018

April 23, 2018

Australia's commercial property law experts

Enquiries

Phone: +61 2 8923 0900
Email: property@massons.com