What is a Property Sharing Agreement and Do You Need One?

If you purchase property with another person, you may be asked whether you would like to enter into a property sharing agreement. Many people, however, may not know what a property sharing agreement is or why they might need one.

A property sharing agreement is a contract between two or more parties that sets out how they will own the property, how the costs will be shared, any restrictions on selling or otherwise dealing with their share, and what will happen if disagreements arise. Ideally, the agreement will sit quietly in your files and never be needed—but when misunderstandings or issues occur, it can become essential.

Ownership of Property

In some situations, the true ownership arrangement can be more complex than what is shown on the property title. For example, one party may contribute more to the purchase price, or one might require bank lending while the other does not. If only one party requires bank lending, banks will require both parties to sign the lending documents. A property sharing agreement enables the parties to record ownership structures and arrangements accurately, reflect unequal contributions, and specify who is responsible for loan repayments.

Property Costs

Owning property comes with a range of ongoing expenses, including rates, insurance, maintenance, and mortgage repayments. It is important that all owners are clear about who is responsible for each cost and what will happen if someone fails to make their payments. A property sharing agreement can set out the processes for handling unpaid amounts, including default interest and debt recovery options.

Restrictions on Dealing with the Property

If a property is owned as tenants in common, either party can sell their share or use it as security for further lending. This can significantly affect the other party’s investment. A property sharing agreement can place restrictions on selling a share, using it as security for additional lending, or renting out the property without the other party’s consent.

What if the Parties Disagree?

Joint decision-making can become difficult when parties have different views. For example, one party may wish to exit the arrangement and sell their share while the other does not. A property sharing agreement outlines what happens in the event of a dispute and provides a clear, agreed process for dealing with situations where the parties cannot reach consensus.

A property sharing agreement is an effective way to ensure all parties understand their rights and responsibilities. It provides clarity, reduces the risk of conflict, and records the parties’ intentions before any issues arise.

If you have any questions about whether a property sharing agreement is right for you, feel free to contact us by email at [email protected] or by telephone on (07) 282 0174.