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Trust deeds and sharing agreements – Part 4

| Guidance | October 16, 2012

The issues relating to meetings and disputes that need to be covered in a Trust Deed or sharing agreement?

This is the fourth of four sections that cover all aspects of sharing

 


Regular meetings

If the sharing agreement is working well, you may rarely meet your fellow sharers. However you should meet at least once a year to discuss the asset’s upkeep, raise issues and, if appropriate, agree dates of use. The approximate date of these meetings (for example, second Thursday in September at 7pm) should be fixed written into the documentation, together with the location. You should try to find a time and place when people agree that they are likely to be available. It is important that all sharers attend.


Disputes and arbitration

Life isn’t perfect and sometimes sharing agreements will fail for a wide range of reasons. Litigation is expensive and to be avoided. Many disagreements can be avoided by ensuring three key things:

  • Any undesirable or unacceptable behaviour is highlighted immediately. Usually it will stop then.
  • Define clearly in the Trust Deed/fractional rental sharing agreement what constitutes undesirable or unacceptable behaviour. Simply discussing and agreeing this is likely to ensure that all the sharers have common standards. If you can’t agree easily, then walk away from the sharing agreement.
  • Define clearly in the the Trust Deed/fractional rental sharing agreement what actions will be taken if one sharer is guilty of different forms of bad behaviour and what actions are taken if the behaviour persists. At the extreme, this may mean giving the other sharers the right to the share of the asset or force its sale, even at below market value.

Agree an arbitration clause in the Trust Deed stating that in the event of a dispute, sharers agree to be bound by an arbitrator’s decision. Arbitration is a relatively informal way of resolving disputes. You have to pay the arbitrator, but substantially less than the cost of going to court and getting legal representation. The arbitrator is an independent party who can be expert in the specific matters of the dispute. He hears both sides of the argument and seeks either to resolve the issue or gives a binding judgement on the dispute.

The Trust Deed can define how the arbitrator is appointed; usually by naming a person/job title who is independent and knowledgeable in your asset and who can decide on a suitable arbitrator for a given dispute. This person will then appoint the actual arbitrator. For example, for property, you might choose to name a company of solicitors that is independent of all the sharers. For cars, you might choose the chairman of the car club for that make of car or the dealer principal for the local dealership for that car. For aircraft, you might choose the Chief Flying Instructor of your flying club.

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