Tips for co-owning a cottage with family
Best to have a legal agreement that covers how to divide time, budgeting and responsibilities
When Mike Potvin’s father died, he left the family cottage near Kawartha Lakes to his wife and four sons.
But only Potvin and one of his brothers were in a position to carry the costs of a vacation property, so they worked out a deal to purchase the shares of the remaining three members.
The two brothers visited a lawyer to come up with a plan to share the financial responsibility even before the transaction closed in July 2017, following his father’s death in 2016.
When heirs or groups of families and friends turn to co-ownership to afford a cottage, experts say it’s best to have a legal agreement in place to ensure everyone knows how things will work — and to avoid a major fallout with loved ones.
The most critical part is getting the right people together, said Peter Lillico, an estate-planning lawyer who specializes in cottage succession and planning. He worked with Potvin on his agreement.
“It’s not just, ‘I like you’ or ‘We get along well together.’ There’s more to it than that,” he said.
“If I know darn well that you have very few financial resources, and when the septic system packs it in, you’re not going to be able to pay your half to fix it, clearly that’s going to be a formula for disaster sooner or later.”
Often, agreements arise when a cottage is bequeathed to more than one person. But cottage co-ownership arrangements are becoming more common as vacation property prices rise and buyers look to pool their resources to get a piece of cottage country, Lillico said.
Once the group is established, the first decision to make is what structure they’ll use to own the cottage, he said. A trust can ensure the cottage stays in the family, a corporate struc- ture can protect against liability, while direct ownership is the easiest and most cost-effective.
The next step is to create a cottage co-ownership contract that covers multiple areas, Lillico said.
The roughly eight-page agreement should include restrictions on transferring the property to others, as well as exit strategies if someone wants to sell.
It should explain how the group will divide time spent at the property, how they’ll share expenses and responsibilities such as cleaning and budgeting, and how often the group will meet to discuss issues.
Groups should identify the individual strengths of their members, said Maureen Reid, a Meridian Credit Union branch manager in Penetanguishene, Ont., in the heart of cottage country.
“If someone’s really good at bookkeeping, someone’s really good at this (skill), why not let them do it?” said Reid, whose credit union offers friends and family mortgages for co-ownership arrangements of up to four people.
Another important section of the document outlines how the group will make big and small decisions. Some decisions, such as major renovations, are likely to need unanimous approval, while smaller ones may be made by the majority or even left up to one individual. One person, for example, may choose to install a satellite dish at their own expense if no other parties want it.
There should also be a process for dispute resolution, which Potvin and his brother once relied on when they couldn’t agree on whether to build a new dock — a considerable expense.
“If you can’t agree on something, you don’t do it,” he said.