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Legal considerations for multi-generation property ownership

By Alexandra Morrissey

Legal considerations for multi-generation property ownership

Multi-generational households are becoming increasingly more common in New Zealand.
The number of people living in multi-generational households increased by 49% from 1996 to 2013. The way New Zealanders own houses is changing, and it is becoming more common for parents and adult children to own a house together.

If you own a multi-generational property, you should have a Property Sharing Agreement in place.

A Property Sharing Agreement sets out:

  1. Why you chose this arrangement and what the desired outcome is.
    • Is it to help your adult children into the property market?
    • Is it so that you can look after your elderly parents or disabled child?
    • Is it an investment?
  2. The length of time you intend to live multi-generational.
    • It is good to make this clear, as the adult children and the parents may have different views on whether the arrangement is permanent or temporary.
    • If the housing arrangement will include services such as caregiving, the younger generation needs to be aware that this could be a lengthy commitment.
  3. The obligations to pay mortgage, outgoings and contribute to maintenance.
    • Each party needs to understand what they are required to contribute to the house.
  4. What happens upon death of one party?
    • Will the survivors have a right to occupy until they either die or decide to sell?
  5. The procedure for selling the house.
    • It is important to clarify what events will result in the selling of the house.

Other considerations:

  • If you wish to build a “granny flat” on your property in order to give parties their own space you will need to check the district plan and any covenants to ensure that you are able to do this.
  • You need to think about the wider estate planning issues, as this living arrangement may benefit one child over others. It is likely that you will need to update your Wills, and need to consider how you will distribute the rest of your estate. You will also require Enduring Powers of Attorney to ensure that someone is able to manage your property affairs if you lose capacity.
  • Where parents are lending money to their children to help them finance their share of the property, they will need a written Deed of Acknowledgment of Debt or loan document to record this.
  • Each party will need to obtain independent legal advice before signing a Property Sharing Agreement to ensure protection of their specific interests.