Co-ownership is a way to achieve your dream
Purchasing a large piece of machinery or equipment can be expensive. But it may not be out of reach if you can team up with a group of like minded investors who share your dream.
Co-ownership is a great way of teaming up with other like minded people who share your dreams.
Co-ownership is a great idea and can help you own your piece of :-
- An Aircraft;
- A Boat or marine vessel;
- A Tractor or other farm equipment.
Co-owning an asset with a group of like-minded investors enables you to share the associated financial and other responsibilities, including:-
- the upfront purchase price;
- ongoing costs;
- maintenance and repairs;
- insurance costs.
Issues to consider
If you are considering purchasing a boat, aircraft, or other item with others, there are some things you need to discuss with your co-owners, before you make the purchase:-
- what will happen if you, or another co-owner, wants out? How do you sell your share of the item and recoup your costs?
- will the other members of the group have the first right to purchase the share of a co-owner who needs to sell up?
- what happens if there are disagreements about how the aircraft or item of property can be used?
- what happens if someone damages the item by negligence or accident?
- how will ongoing maintenance and repairs be handled?
- how are ongoing costs to be paid, for example, the costs associated with repairs, maintenance, storage, etc;
- what happens if a party does not pay their share of ongoing costs or does not comply with their obligations for repairs or maintenance under the agreement?
- how regularly will members of the group be able to access and utilise the boat or machinery, and for how long? Will a diary system be in place?
- should the members of the group regularly contribute to a maintenance and repairs fund? How much and how often should the co-owners contribute to the fund;
- should insurance be taken out over the item of property? Will all members contribute?;
- what proportional share will each owner have in the property?
Avoid Failure - make a plan
As Benjamin Franklin said "If you fail to plan, you are planning to fail." When it comes to co-ownership, it is prudent to sit down with your co-investors and talk about the various issues that may crop up. Feel free to use the list of what if's above as a starting point.
When you've reached an acceptable agreement (plan) through these discussions, the terms should be reduced to writing and signed by all the co-owners.
The parties can vary their agreement in the future, if all other co-owners agree in writing, otherwise they will need to stick to their pre-agreed arrangement in dealing with their joint asset.
This ensures that each party understands exactly what is expected from each of them, from the beginning - before committing themselves to the deal.
What if things go wrong
Discussing all aspects of the co-ownership, and putting your agreement in writing before committing to the purchase, will minimise any disputes or misunderstandings which may otherwise occur.
For example, this may prevent a party from arguing down the track that they hadn’t budgeted for the extent of the ongoing costs of repairs, maintenance, insurance or storage fees. And if aparty does stop paying their share of ongoing costs or performing their obligations under the agreement, the parties could act quickly to remedy the “default” and minimise any damages, for example, by buying out the non-complying party (for their share of the asset, less the costs owed by that party).
These issues should all be documented and agreed to up front, so that if anything does go wrong, the parties will be able to address the issue quickly, according to the terms of their agreement.
Agree to the terms of the co-ownership and put it in writing
This gives the co-ownership the best chance of success, and ensures the co-owners will have an open and honest relationship from the beginning.
To assist with this process, we have put together a Co-ownership Agreement. There are two versions of the Agreement, one for the purchase or an aircraft, the other for the purchase of a marine vessel, such as a yacht or boat. However, they are acceptable for most type of large machinery or equipment, which a group of friends, investors, or business owners, have decided to pool their money to purchase.
If you are investing in real estate, with a group of like-minded investors, see here.
Investing with others is a great way to afford an item you otherwise may not have had the resources to purchase - but make sure to put your agreement in writing to ensure smooth sailing of the co-ownership venture.