Co-owning a cottage with family members usually happens through an inheritance, but for Stephen Warden and his parents, it was an intentional purchase.

Mr. Warden has always wanted a cottage of his own since visiting his grandparents’ cottage as a kid. “I remember it like it was yesterday. I love the water. I could be on the water every day,” says Mr. Warden, whose wife is also a cottage enthusiast, along with their two kids, ages 5 and 8.

Mr. Warden looked at cottages to buy for about five years and then rented one for a couple more years. “It just made the itch worse,” he says.

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In August, 2016, he and his wife finally decided to purchase an all-season property on Six Mile Lake near Port Severn, Ont., with his parents, Margaret and Keith.

The 50-50 investment came with an agreement and a few rules: Mr. Warden’s parents made the down payment, while he and his wife are responsible for paying the mortgage, taxes and other bills as well as managing the rental. The couple also receives the rental income. Both families pitch in to clean and maintain the property.

As for use, each family gets the cottage for one week a year, and it’s rented out for the rest. When Mr. Warden’s parents have cottage access, they extend an open invitation to the entire family to come and enjoy.

“My eventual goal is to, when I retire, sell my house and live there,” Mr. Warden says, and then eventually pass it down to his children. “They love the water too. It will benefit them in the future. I want them to make memories there, too.”

Maureen Reid, a branch manager at Meridian Credit Union in Penetanguishene, Ont., says the benefit of owning a cottage with a family member is that you’re sharing the work and expenses – and you know the people you’re sharing the space with. There can also be conflicts, which is why having an agreement to cover ownership, upkeep, cleaning and expenses is important. The Warden family has done it right, she says.

“What’s important here is that they put some clear rules down,” says Ms. Reid. “It’s important to have that up front.

“Not only can they enjoy it now … but it can turn out to be an awesome investment, too.”

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Janet Sim, a partner and head of the trusts and estates group at Osler, Hoskin & Harcourt LLP, recommends families consider one of three main options when purchasing a property together:

  • Have one owner, such as a brother or sister, who then has an arrangement with other family members on how and when they can use the property. The owner could then charge them a fee or a portion of the expenses, based on their use.
  • Joint-tenancy: Where two or more family members (including spouses) own an equal interest in the property. When one owner passes away, the full ownership goes to the other owners equally (or, in the case of a couple, to the last surviving spouse).
  • Tenancy-in-common: Where more than one owner has an interest, but the interests don’t need to be equal. For instance, two siblings could each own 25 per cent and a third sibling could own the remaining 50 per cent. When one sibling passes away, their portion can be distributed by their will to anyone they wish − for example, their children. Alternatively, an owner could state in their will that they want their portion sold and the funds distributed to their heirs. Both arrangements can be tricky, and Ms. Sim recommends that the ultimate disposition of the cottage interests be set out as one of a number of provisions in a co-ownership agreement among the cottage owners that they sign when the property is purchased. Often, there would be a provision in the agreement that gives one or more of the surviving owners the first right to buy another’s interest. Also, Ms. Sim notes that it’s unlikely a non-relative would buy into a family cottage, which should also be a consideration when drawing up the agreement.

There should be rules around what happens if a family member wants out of the arrangement before any of the owners passes away, Ms. Sim says. “A first right of refusal in favour of the other owners could be stated to apply to this situation as well,” she says.

Mr. Warden says the arrangement with his family has been working well, due in part to the agreements they put in place from the start.

His advice for others is to set expectations up front, but also be a bit flexible with some of the overall aspects such as upkeep and usage, especially if it’s family. “You have to be willing to give and take a little too,” he says.