Getting on the housing ladder is tough! It is therefore becoming commonplace for people to pool their resources for the purposes of buying property. Be they friends, siblings, or parents assisting children, this can have huge advantages, particularly if KiwiSaver funds can be accessed.
It is important to consider from the outset what might happen if things do not go as planned. Many things could go awry in such an arrangement – loss of job, injury, death, or even just disagreements and fallings out. We often find that legal advice on such an arrangement is only sought when the unexpected happens. “We are friends/family, we thought we would be able to work it out ourselves!”
When considering purchasing property with friends or family, it is advisable that the parties enter into a Property Sharing Agreement that sets out the purchasing arrangements and processes for different circumstances, including:
- Purchase price contributions and how they are made up, whether these are equal or unequal;
- Borrowings and what securities can be registered against the property;
- A process to follow should one of the parties wish to sell and the other(s) do not, or in the event of the death of one of the parties;
- How outgoings, utilities and maintenance costs are to be paid and shared between the parties, equally or in ownership shares;
- How disputes between the parties are be dealt with;
- Distribution of the proceeds of sale, particularly in the event one of the parties does not pay their share of outgoings, loans, etc.
Buying a new home is exciting but it is important not to overlook the details. Careful consideration should be given to the risks of purchasing with others and obtaining good advice on how a joint purchase should be structured.
Bright line tax is another issue that will need to be considered. If some owners are living at the property, and other owners are not, then the main home exemption is not likely to cover them all.
Please contact our property team if you are interested in buying a property with another person, or would like to discuss ways to assist someone with buying a house.