Buying A Property With Friends Or Siblings

4 October, 2021 | Duncan Lang

Whether it is your first home or your fourth, you can buy property with your family or friends. Some first home buyers chose to go in together and to combine their savings, KiwiSaver funds and income to achieve their goal of being able to own their own home. If you have KiwiSaver, you can use that towards the purchase of the property, however it must be for your first home and you must live in it.

For those that are not married and not in a relationship, this can be easily achieved, and we would always recommend that a property sharing agreement be drawn up to establish the ownership and ongoing management of owning a property together.

Forms of ownership – what goes on the property title?

There are two forms of ownership, either joint tenants or tenants in common.

Joint Tenants

Joint Tenants means that upon the death of one, the ownership is automatically transferred to the survivor. The property does not form part of your estate if you pass away.

Tenants in Common

Tenants in common specifies what percentage or share of the property is owned by each party on the title. In the event of the death of one of the owners, their share of the property forms part of their estate – and is distributed according to their will or the Administration Act if there is no will.

The shares can be determined by you once you know who is contributing what percentage of the property.

For example, if there were three people buying the property equally, they would be tenants in common with a third share.

Another example would be if two people were buying the property, but contributing different amounts – eg one person ¼, one person ¾

Which form of ownership is best when buying with friends or siblings?

Joint tenant ownership is generally used by those in a relationship. When you are purchasing with friends or family members, your ownership would usually be as tenants in common, meaning if something there to happen to any of you, your share of the property will become part of your Estate and not be transferred automatically to the remaining owners.

What happens if one party wants to sell later on?

Hopefully a property sharing agreement is entered into, which would usually contain a clause to offer their share to the co-owners first. If the co-owner does not wish to buy or isn’t able to buy, then the property is sold with the funds distributed in accordance with their shares

What happens if only one party is going to live in the house?

If one party was to live in the property, then the other party would want to be paid some form of rent. Usually, the parties would obtain a rental valuation and the party living in the property would pay this (less their ownership share percentage)

What happens if one person contributes more mortgage or more deposit?

If this extra payment is not dealt with as part of the ownership shares, then usually this would be repaid to the person contributing more to the price or mortgage, when the property is sold.

What is a property sharing agreement and how can it help?

A property sharing agreement is the governing document between the co-owners. It usually deals with the following issues:

• The parties contributions to the property
• Who is paying the mortgage
• Who lives in the property
• Maintenance and improvement of the property
• What happens when one party wishes to sell
• Resolving disputes
• Death of a co-owner

There isn’t a one size fits all situation, and a property sharing agreement can be made specific to your situation.

For assistance with a property sharing agreement, contact expert property lawyer, Duncan Lang by email at duncan.lang@smithpartners.co.nz or by phone at 09 837 6834.