Buying property with family – fun or potential fiasco?

Civil Litigation & Dispute Resolution
Property Law
Feb 14 2024
In the present economic climate, getting into (or climbing) the property ladder is tough. To get a deal across the line, purchasers are increasingly looking to alternative ownership options.

One such option we commonly see is ‘co-ownership’ of property between family members. Taking matters a step further than the traditional parental guarantee of a child’s purchase, we are now seeing co-ownership between multiple relatives (such as siblings and their spouses, or parents and all/some of their children). This is despite that not all owners intend to live in or maintain the property.

While this sounds good on paper, unfortunately these arrangements often proceed without the appropriate documentation and can go wrong. Untangling them can be complex where there has been intermingling of purchase funds, family members not being treated equally, deaths occurring and relationships souring over time.

What to do if you want to buy property with other people?

If you are buying property with others (often who are not your spouse or partner), you should have a written agreement to cover key aspects.

The terms can cover:

  • ownership shares and monetary contributions to purchase (including bank loans);
  • who will live in the property;
  • who will pay property expenses and maintenance;
  • what will happen if someone wants to sell the property and others don’t;
  • what happens on death of a party;
  • and how will any proceeds of sale be distributed.

This way, if a dispute does arise there will be a clear path forward to minimise any fall out (if possible). Property Sharing Agreements are used to document these arrangements, which are simple but effective. Purchasers can also consider whether funds should be gifted or loaned. Our property lawyers can assist you with this process. You can also read our article on Gift v Loan.

If you are wanting to buy property with your partner or spouse, there are a different set of questions and documentation to consider (for example, whether you need a contracting out agreement). Our dedicated family team can advise you on all aspects of relationship property. See also our article on Contracting Out Agreements 101.

When it goes wrong

A recent example of an undocumented family property purchase is the case of Boot (As Executor and Trustee of Estate of Hart) v Stephens [2023] NZHC 3863.

Parents (the Harts) helped their daughter and her husband (the Stephens) buy a property.  The title said that each couple owned a 50% share of the property, but in reality, the Stephens contributed more to the purchase price. They also paid for most of the property expenses in that time. Years later, both the Harts died, and their other five children wanted to sell the property so that 50% of the sale proceeds could be distributed to the children via their mother’s estate. The Stephens claimed that they were entitled to 67% of the property. Additionally, they had lived in the property for 17 years and did not want to sell. Ultimately, the Court held that, given the family’s intentions and contributions, the Stephens were entitled to 66% and could buy out the estate’s 34% interest. Regrettably, the dispute and litigation took a toll on the siblings’ relationships.

If you own property with your family and there is a dispute

There are a number of options to resolve a dispute if there is no written agreement, including obtaining Court orders to force a sale under the Property Law Act 2007.

First and foremost, our experienced litigation lawyers can help you to resolve matters before Court through negotiation or mediation, if possible. If negotiations are not successful, we can guide you through the litigation process.

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