- Cherish memories without losing sight of reality
“People idealize the cottage,” says Cindy Hatherley, RE/MAX real estate agent. “They tend to remember only the wonderful summers of their childhood and forget all the hard work.” This can prevent families from having a frank discussion about how to fairly divide the responsibilities of owning the cottage once their parents stop caring for it (and paying the bills).
“We really should have this conversation before handing over the chalet, says Ms Hatherley, but if it’s after, it won’t be too late.”
Indeed, the best way to preserve the cottage for future generations is to ensure that everyone involved is on the same wavelength. “Disputes over the family cottage are one of the most common reasons for sale,” says Hatherley.
- Write everything down
Your family cottage sharing strategy should have a clear handover plan. “To begin with, parents need to do a realistic examination of the situation,” says Peter Lillico, a lawyer who specializes in this area.
“The conversation should begin by asking each of the children not only if they want to inherit the family cottage, but also if they are ready to share it, to do the work that it requires, to act in as steward of the property for a generation and, if necessary, to accept that the chalet monopolizes part of his inheritance, explains Mr Lillico. This will help create appropriate expectations in children. Thus those who commit will be ready to assume their responsibilities.
When the chalet is held in co-ownership, there must be a chalet sharing agreement drawn up with the help of a lawyer. This agreement takes the form of a detailed document clearly explaining how each issue will be handled — from the more difficult questions (e.g., what if one of the parties wants to sell its share? ) to the most ordinary (e.g., who will be responsible for routine maintenance?).
Now that you have a long-term view, it’s an excellent time to meet with a financial and estate planning services professional. Get expert help to get your things in order – not just your cottage.
- Maintain control of day-to-day operations
Any cottage-sharing agreement must include a decision-making framework. It’s a vital part of the deal to deal with important (and less critical) issues relating to the property.
“In general, operational questions (e.g., should the wharf be replaced?) will have to be adopted by majority vote, indicates Mr Lillico. I also call the capital questions (e.g., should we sell the cottage outright or should we demolish it and build a year-round house on the site). These questions require unanimity.”
- Plan to avoid excessively high fees
Major repairs, especially if they are unplanned, can put a strain on any group of cottage owners — family or not. The best way to protect against these is to be proactive.
“We’re trying to phase out items that will cost a fortune to replace when they break,” says Stephanie Verge, co-owner of a family cabin on an island in Georgian Bay, Ontario.
“Our septic tank is old, and we dread the day when it will stop working. Since the cottage is only accessible by water, replacing the septic systems will be more expensive than land. This year we are installing a solar toilet to reduce the pressure on the system.”
It is also essential to protect yourself against the costs of a fire, theft or other disaster, thanks to home insurance covering the building and its contents (including boats and other recreational equipment).
- Have an exit plan
The cottage sharing agreement must provide clear guidelines establishing how the value of a share will be calculated if one of the co-owners wishes to sell it. It is essential to formulate these guidelines in these times of rising prices. For example, two hours north of Toronto in Muskoka, one of Canada’s hottest areas for second homes, sales of waterfront properties hit a new high in the first five months of 2017. According to the Canadian Real Estate Association, they increased by 2.9% compared to the same period the previous year and, in May 2017, the median price of these properties was $522,500, a jump of 24.4% compared to May 2016.
According to Mr Lillico, a fo
