Co-ownership Agreement

Co-ownership Agreement for Sharing a Cottage

Cottage Co-ownership Agreement- If you thinking of sharing a cottage you need to create a cottage co-ownership agreement.

You are establishing the mutual and defined rules and regulations for the property use and enjoyment.

You need to discuss the co-ownership agreement!

This doesn't mean you don't trust your co-owners. It is to simply put in place the rules of running the property, how issues are dealt with, how time is shared etc.

A lot can change in five or ten years. The way everyone anticipates possible issues now will ensure that they are dealt with smoothly and efficiently.

You can't anticipate all of the issues that may come up, but proper planning and a properly prepared agreement will cover many of the aspects that may arise.

What is Your Budget?

• Consider the mortgage down payment
  
• Home Inspection
  
• Septic Inspection
  
• Travel Costs for the Search and Inspections
  
• Lawyer's fees for the documents required and the closing of the property.
  

A Few Items to Consider in a Cottage Co-ownership Agreement

• Are you going to be equal owners? This can get complicated if the property is not owned equally. Expenses, time usage, improvements all become an issue if the majority owner wants it done. Clarify first!
  
• How is the title of the property to be held? Are you going to be joint tenants or tenants-in-common? Are you going to form an entity such as a limited partnership, corporation or trust?

Explore the system chosen, if someone gets into trouble financially, the other co-owners may find a creditor wanting to take the cottage.

What about property improvements?

Some things may need to in the budget right away. If the property needs a new deck, roof or docks, you might want to buy new beds, furniture, fridge, stove etc.

Adds up quick, make sure everyone agrees on the budget and costs to do this. You should get quotes from several contractors in the area ensure your work list is itemized with time lines.

Is there more? Does someone, or a few of you, want to have a gazebo built to get away from the bugs, how about a hot tub, boathouse, canoes, kayaks. there are so many things that can be added.

In this situation, what if someone doesn't want it. You need to clarify how it is all dealt with and have a common vision for the future sharing of the property.

To further illustrate how a co-ownership agreement can be broken down further:

• Routine Maintenance.
  
• Necessary Repair.
  
• Discretionary Repair.
  
• Major Repair and Damage.
  
• Rentals.
  
• Family and Friends.
  

How will the time be shared?
Equal sharing is probably the best way to share ownership, equal costs, payments and responsibilities. This way you can evenly divide up the time, into ownership blocks.

For example, if there are four of you sharing, you each get two weeks in the summer, every eight weeks it rotates back to the first share.

If the property is held in an entity, you need to be aware of tax implications. If a co-owner plans to use their weeks at the property as a rental, this can affect the property. Revenue Canada and capital gains taxes are issues that need to be kept in mind.

For this you should get Professional Tax Advice!

What about death, divorce, new spouse, job loss and reselling a share or the property?

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