Recently a client came to us with a problem. Years ago he and his brother had bought a series of investment properties together by pooling their resources and relying upon their steadfast ‘blood is thicker than water’ bond along with the old “she’ll be right” attitude. Ten years later, our client has moved offshore, married and has a young family. His priorities have changed along with his financial goals. He wants out of the property portfolio… this is where things get tricky. Whilst the duo spent time and effort researching the ideal properties to purchase they did not consider the behind the scenes ownership structure in order to safeguard their individual interests nor consider an exit strategy for the future. The result, a stalemate situation: one wants out, the other does not and the personal relationship is quickly souring. The outcome of this situation and the legal cost to each party depends upon their ability to reach an agreement. If the relationship has broken down to the point they can not agree then the less desirable alternative to resort to expensive intervention of the Courts to pursue a statutory sale of the properties is available. This will sever property ties and likely family ones.
Whilst learning from ones mistakes is instructive it can also be expensive when property is involved. The takeaway is that purchasing a property with someone else whether it is your partner, a family member or friend requires careful planning. Consider the consequence of the relationship breaking down or the death of the other person. Drafting an agreement that sets out the terms of the co-ownership and provides an exit strategy should one party want out down the track may save time, money and potentially your relationships. It is also important to decide how you wish to co-own a property together, will you own it as tenants in common or joint tenants? This is a decision that is commonly given very little consideration but will dictate whether a share in a property is able to be gifted in a will or whether the share is automatically transferred to the surviving owner.
If you need are looking at purchasing a property or want advice on a property matter, please feel free to contact O’Brien Connors and Kennett Lawyers on 02 9982 1655.