Buying With Partners

Friends often get together to buy a vacation home, either as tenants-in-common or in a legally constituted partnership.

Owning as tenants-in-common, friendly as it sounds, can cause headaches. Head off problems by anticipating and addressing them in a written partnership agreement. Use your real estate lawyer to draw up the agreement, but ask a lawyer in the vacation locale to check relevant regulations.

Make sure the contract addresses the following:

■ How ownership will be divided, which in turn determines who pays how much of the down payment, monthly payment, maintenance and repairs. The contract should also describe how any profits or losses from rent or sale of the place will be divided and how tax benefits will be distributed.

■ Who gets to use the property when.

■ What constitutes a deciding vote and under what circumstances a vote is considered necessary.

■ Which owner will act as managing partner and thus be responsible for signing checks and paying the routine expenses.

■ How much advance notice a withdrawing partner must give and how the buyout price will be set.

A limited partnership should protect the existing mortgage when a new owner enters the picture if the documents make clear that it is an interest in the partnership—not an interest in the property—that is being transferred. (See the discussion of limited partnerships in Chapter 12.)

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