Buying a Home with Friends or Family – Legal Considerations You Need to Know

With house prices remaining high across New Zealand, it’s becoming increasingly common for friends, siblings, or extended family members to join forces to get onto the property ladder. While co-ownership can make home ownership more achievable, it also comes with legal complexities that need careful planning from the outset.

Before you sign an agreement to buy a property or contribute any money, it’s important to understand the different ways property can be owned and put mechanisms in place to protect everyone’s interests, in case your circumstances change.

1. Understand How You’ll Own the Property

In New Zealand, there are two main ways to co-own property:

•   Joint tenancy – Each owner has an equal share in the property. If one owner dies, their share automatically passes to the surviving owner(s), regardless of what their will says.

•   Tenancy in common – Each person owns a defined share (for example, 60/40 or 50/25/25). These shares can be unequal, and each person can leave their share to someone else in their will.

For most friends or family members (other than spouses) buying together tenancy in common is usually the preferred option, as it allows flexibility and protects each person’s contribution.

2. Have a Property Sharing Agreement

A Property Sharing Agreement is essential. This document records how the ownership arrangement will work day-to-day and sets clear expectations about financial and practical responsibilities.

It can cover:

•  How much each person is contributing to the purchase price and deposit.

•  If all co-owners are intending to live at the property, what the parameters of that co-habitation will be (e.g. will there be fixed house rules, will you have exclusive use of certain areas?).

•  If it is not intended that all co-owners will live at the property (e.g. a parent is buying a share of a property to help their child onto the property ladder), how a non-occupying owner will be compensated and what their rights are.

•  How mortgage payments, rates, insurance, and maintenance will be divided.

•  What happens if one party wants to sell or move out.

•  How disputes will be resolved.

•  What happens if someone defaults on their share of the mortgage.

In the excitement of possibly purchasing your first home, you might not have even considered the raft of interpersonal conflicts which could arise when living with someone for the first time, let alone co-owning a very valuable asset with them. Things like interior design choices, or lifestyle arrangements could easily sour a relationship: troubleshooting these possible scenarios with your lawyer before purchasing a property with someone else could really help you to dodge a (metaphorical) bullet.

A Property Sharing Agreement will flag these potential issues, provide a roadmap for resolving them, and can help avoid conflict later.

3. Think About Exit Scenarios

It’s easy to agree on buying a property together, but it can be tricky to navigate a situation where one person wants out. Circumstances change: one party might get married, move away, or want to buy on their own.

Generally, when individuals “team up” to buy a property with friends or family, they do so due to financial constraints: it may be that one person is better able to service the loan but has limited savings to contribute to the deposit or vice versa. This can make it particularly difficult when one co-owner no longer wants to retain their share of the property. To provide your co-owners with certainty up front, your Property Sharing Agreement should set out:

•  A right of first refusal (so existing owners can buy out the person leaving).

•  How the property will be valued if one person wants to sell their share.

•  What happens if everyone agrees to sell the property.

A clear exit strategy protects all owners and helps prevent stalemates or forced sales.

4. Consider Relationship Property Implications

If any of the co-owners have partners, relationship property laws can complicate things. For example, if one co-owner enters a relationship and the home becomes their “family home,” their share may become subject to relationship property claims. This could create difficulties or delays to a proposed sale of the property under the property sharing agreement.

It is therefore wise for each co-owner who is in a relationship to have a Contracting Out Agreement under the Property (Relationships) Act 1976 (a “pre-nup”) to keep their share separate and protected. This will avoid adding any unnecessary complexities to an already complex ownership arrangement.

5. Get Independent Legal Advice

Each proposed co-owner should receive independent legal advice before signing any sale and purchase agreement, loan document or property sharing agreement. Even though you’re buying together and have some common interests, you each have individual legal and financial interests to protect. Independent advice, tailored to you and your personal interests is therefore essential to ensure that you are making a sound decision for you.

Your lawyer can:

•  Advise on the right form of ownership for your situation.

•  Draft or review a Property Sharing Agreement.

•  Liaise with your lender.

•  Help with any relationship property considerations.

6. Review Your Property Sharing Arrangements Regularly

Good planning at the beginning makes co-ownership work smoothly and helps to keep relationships intact, however, circumstances are not static. It’s worth reviewing your arrangements regularly, in case any updates to the Property Sharing Agreement are required. We also strongly recommend updating your arrangements if:  

•  One co-owner’s personal situation (e.g. financial or family) changes; or

•  There has been a change to the way property expenses are being shared; or

•  A renovation or refinance of the property is planned. 

In summary:

Buying a home with friends or family can be a smart way to enter the property market, but it requires clear communication and solid legal documentation. The key is to get advice early and put everything in writing.

If you’re considering teaming up to buy a property with others, our property team at McMillan&Co. can guide you through the process, prepare the necessary agreements, and ensure your investment and your relationships are protected for the long term.

Emily Robertson, Senior Solicitor
emily@mcmillanco.nz