When siblings decide to invest in a property together, it`s important to establish clear guidelines with a property agreement. This legally binding document outlines the responsibilities and rights of each sibling involved in the ownership and management of the property.
Setting up a property agreement between siblings requires careful consideration of several factors, including the type of property, financing, and maintenance responsibilities. Here are some key elements to include in your property agreement:
Ownership Structure:
The ownership structure of the property should be clearly defined in the agreement. Will it be joint tenancy or tenancy in common? Joint tenancy means that siblings own equal shares in the property and have the right of survivorship. This means that if one sibling passes away, their share of the property automatically passes to the surviving siblings. Tenancy in common means that siblings own equal or unequal shares in the property, and their share of the property can be transferred to another person upon their death.
Financing:
The property agreement should also include details on how the property will be financed. Will siblings contribute equal amounts towards the down payment and the mortgage? How will the ongoing expenses for the property, such as property taxes, insurance, and repairs be divided?
Maintenance Responsibilities:
The agreement should also clearly outline the responsibilities for maintaining the property and making repairs. Will siblings split the costs of maintenance and repairs equally, or will they be responsible for specific tasks based on their skills or availability? It`s important to have a plan in place for how to handle any unanticipated repairs or necessary improvements.
Exit Strategy:
Finally, the property agreement should include an exit strategy in case one or more siblings decide they no longer want to be part of the investment. How will siblings handle the sale of the property? Will they buy out the shares of the sibling who wants to leave, or will they sell the entire property and divide the proceeds?
In conclusion, a property agreement is a crucial document when siblings decide to invest in a property together. It establishes clear expectations and responsibilities and can help avoid conflicts down the line. With a well-crafted property agreement, siblings can enjoy their investment and protect their interests.