Here’s how to successfully share a cottage

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Shared ownership resolves many problems—especially the problem of affording a cottage—but it can create others. One challenge is that when co-owners are equal, no one individual can outvote the others. The solution: sit down together and craft a formal cottage sharing agreement, while everyone is still friendly.

Share the joy, share the load

To start, co-owners need to ask some significant questions. For example, can all owners use the cottage all the time? If there are periods of exclusive use, how are they allocated? During their turn, can owners bring guests, or even rent or lend out the cottage? Who will open and close the cottage each year? Who makes sure the utility bills, municipal taxes, and insurance premiums are paid on time? And how are collective decisions for changes, improvements, or additions made?

Cost-sharing usually causes the most discord. Should ongoing costs be split equally, or shared in proportion to usage? If, for instance, the septic system packs it in, one owner may be able to pay his share of the repair bill out of his petty cash, while another may be too strapped to contribute. So does the cottage go unused for a while or must the strapped owner take out a loan? Or, do the better-off partners pay for everything? A cottage agreement, on the other hand, could set up a discretionary reserve fund for unexpected expenses, as part of the shared cottage budget.

Keeping the cottage

No one wants a discontented or financially pressured owner to be able to sell his share outside the group without involving the others. Without an agreement, however, any one owner can apply to court to have the property sold and his share paid out. It’s far better for all owners—for their mutual protection and benefit—to agree to give up this right to force a sale and set up a selling mechanism instead. An agreement can prohibit selling a share entirely, but that ignores a legitimate need to sell, such as a long-distance move, serious health issues, or a divorce. Instead, you should create a responsible exit strategy. One option is a right of first refusal by the other owners and a reasonable payout formula for the withdrawing owner. If the remaining partners can’t afford the departing owner’s share, they could be given a veto over prospective new co-owners. If they stubbornly reject all proposed replacements, then as a last resort the cottage goes up for sale. That option usually motivates the remaining owners to buy the share, find a co-owner themselves, or accept a fresh face suggested by the departing owner.

A simple majority-rule vote can resolve many decisions, such as how to redecorate or divvy up long weekends. Big, complicated issues—renovations, inviting new owners, selling the cottage—should require a higher level of agreement, perhaps unanimous approval. A cottage sharing agreement should clearly identify which issues need a majority, and which need unanimity. It can also provide for mediation or arbitration in times of disagreement. For example, if one owner thinks a new roof is needed and the other does not, a knowledgeable, independent third party could provide an unbiased opinion to guide the decision. In a two-owner situation, where a majority is impossible, the agreement can provide for arbitration, where an independent third party, agreed to by the owners, actually makes the decision.

Roofs and redecorating are easy. It’s leaving perishables in the fridge, not filling the gas tanks, or putting garbage in with the recycling that can be the real sand in the gears. At the outset, draw up a set of cottage rules and include them within the sharing agreement. This can clarify expectations and prevent unnecessary headaches later.

Some cottage agreements provide for a regular meeting, usually once a year in the off-season, to discuss significant issues and next year’s plans. You can set a budget for operating expenses, planned repairs, and improvements, and allocate responsibilities—the same as last year, or is it someone else’s turn to pay bills, plan the work weekend, or attend the lake association meeting? Have someone take notes of what is decided, and remember, meetings always go more smoothly if someone brings snacks!

Cottage agreement checklist

List all tasks and responsibilities

  • Create a master list of all the tasks involved in taking care of the cottage, no matter how small, obvious, or infrequent.

Determine the division of labour

  • Find a fair way to allocate tasks: rotating? equally? in proportion to usage?
  • Who is responsible for opening and closing, or taking care of maintenance and repairs if, say, the outboard breaks or the fridge dies?
  • Who operates the bank account and organizes and pays the utilities, insurance, taxes, etc.?

Agree upon usage among the owners

  • Who gets to use the cottage—owners only, family of owners, or friends?
  • If friends use the cottage, does a co-owner have to be present?
  • Can the cottage be rented to others? How will revenue be shared?

Allocate usage among owners

  • Is it a free-for-all (anybody can come up at any time) or if one owner has July, does the other have August?
  • Create a fair way to schedule cottage time and make changes if necessary.
  • Determine any periods of shared usage (regatta weekend? the weekend of the cottage association annual meeting?)

Work out a mechanism for retaining ownership within the group

  • Will ownership automatically pass to children?
  • Do you want to limit ownership transfers, with rights of first refusal for the existing owner group?

Work out the financial realities

  • Budget for routine bills (taxes, insurance, electricity) and unplanned expenses (such as septic repairs, cottage improvements, a new outboard).
  • Plan a decision process: unanimity or majority rules. Is there a veto, and in what circumstances?
  • How is the annual budget calculated, and by whom?
  • How much is contributed monthly or annually to the bank account for cottage operations?
  • What about paying for major emergency repairs?
  • If one owner wants an upgrade, such as a new dock, bunkie, or satellite dish, must the others agree? Unanimously or does a majority rule? Who pays?

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