Reality check: Buying a holiday home with a friend

With the price of waterfront property skyrocketing, many people have considered splitting the cost of a holiday home with friends. This can work well - if the legal snags are sorted out first.

A mothers' coffee group was the launch pad for this kind of venture for three Hamilton women. Sally had a desire to buy a weekend escape property, do it up and enjoy the long-term benefits. Most properties she looked at were beyond her budget, so she put the idea of going shares to fellow new mums at their weekly get-together.

Two of them, Catherine and Tracey, jumped at the idea, and before you could say "open home" they had a real estate agent on the phone and their property hunt was underway.

They were looking for a place they could tidy up but would be low-maintenance and practical. It needed to be able to accommodate the growing families, together or separately.

It wasn't long before they had three options at different locations but the decision was made for them when two of the properties were snapped up.

The three women signed an agreement to buy a property on the Coromandel, and not only became home-owners but partners. They bought the slightly rundown four-bedroom weatherboard house as tenants in common - they were equal partners who contributed the same amount of money and shared the mortgage payments equally.

Two weeks later, after a major clean-up outside, and with the bathroom repainted and a second shower installed in the oversized laundry, the three women sat back ready to enjoy their joint purchase. They had done much of the work themselves to keep costs down.

Unlike some stories of this nature, this one has a happy ending.

Two years on, the three families are enjoying the fruits of their coffee-group decision and sharing the property on weekends and holidays.

Hamilton lawyer Paul Ellice says thought must be given to this kind of transaction at the beginning to avoid misunderstandings later.

"One of the hardest buying and selling arrangements is one made with a group of friends."

He says they may think they have agreement in principle but each person should have separate legal representation to ensure their interests are protected.

"While everyone is getting on with each other it's fine but it doesn't often last. Things change, people die, couples divorce; what happens if one friend goes bankrupt?"

It is important to have an agreed process in place to deal with any situation. This is generally called a property share agreement and deals with things such as:

In what proportions is the property to be owned; what happens to surplus funds when the property is sold or what happens if there is money owing. Who pays how much?

What happens if one of the partners dies. Does the share go to his/her spouse?

What happens if no one in the initial buying group likes the new partner?

What happens if a partner divorces - can the property be affected by the divorce settlement?

"Get the paperwork right at the beginning to prevent the high cost of litigation in dealing with a dispute later," Ellice says.

He is finding more people are choosing to purchase property as a group.

" Play the what-if scenarios and ask your lawyer for input."