Owning some getaway property may have been a good idea at the time that you purchased it. Most families who are investing in this type of property have different reasons for doing so. Some because they have young children and having a cottage to go to during the summer months is a great long term vacation for them. For others they will buy a cottage with the thoughts of it perhaps becoming their retirement home in the future. Then there are those who just buy it for investment purposes only. No matter what the reasons are the decision was made according to the circumstances at the time.
What Happens When Circumstances Change
Nothing stays the same in life and situations and circumstances change. Often these can have an effect on the finances. When there are major changes that one has no control over then it may mean having to make some financial decisions that would not normally arise. One of these may have to do with the ownership of the cottage.
Reducing The Expenses
A prime example of a major change is those that are taking place during the Pandemic. Many people are giving second thoughts about their secondary property. Finances are of major concern because every individual is facing uncertainties. The thought may arise to find ways to reduce the costs of the vacation property. There are different options for doing this but one that some are considering is Cottage sharing.
Cottage Sharing With Family Members
This type of venture is where different family members will share the cottage. This is NOT referring to joint ownership. Instead of family visiting the cottage for a day or a weekend, there is an agreement that they will get to use the premises for a period of time.
Setting The Rules
If you as a cottage owner are going to do this then both parties need to agree on the rules and these should be put into a written agreement. They should include:
The time frames:
It has to be agreed upon which family will have full use of the cottage during a specific period of time. There should be an agreement that there will exclusive time frames.
Guests:
There has to be rules as to whether each family is allowed to invite guests to the cottage during their time. Another consideration is whether either family can decide to rent out the cottage during their time allotment.
The Costs:
The primary reason that most cottage owners enter into this type of agreement is to help offset the costs of the cottage ownership. How these are going to be determined depends on what the agreement entails. If this agreement is only going to run from May 1st to Thanksgiving for example then the costs sharing should only be for this period of time. This is approx. a six month period. So the costs such as water, hydro, cable, fees etc. should be split equally if the six months is being shared equally. Included in this should also be six months sharing of the taxes.
Damage:
It also has to be agreed up that if any damage occurs during the other family’s time period they are responsible for the repair of this. However, if damage occurs under normal circumstances they cannot be expected to pay. This is going to be up to the actual owner.
These are just some guidelines for those entering into a cottage sharing venture. Every situation will be unique so the agreement will have to be based on this.
Don’t forget there may be tax implications that come with your cottage ownership. If you need assistance with this or any other tax service be sure to contact me. I would be happy to provide my services to you.
