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What are the possible sharing agreements available?

| Guidance | October 16, 2012

There are three fundamental mechanisms for sharing all assets:

  • Joint ownership by all parties (co-ownership, shared ownership, partial ownership or fractional ownership)
  • One party owns and the other(s) pay for use or occupation through a licence, lease or hire agreement
  • Shared use, where no money changes hands, as both sides benefit in other ways.

There are three routes to fractional ownership or joint ownership:

  • two or more people get together and co-buy the asset
  • one person already owns the asset and one or more people buy a share of the asset
  • one person already owns a share in the asset and sells the share.

Depending upon the size, type and value of the asset and on the number of joint owners, there are several different mechanisms to enable fractional ownership or joint ownership:

  • Joint ownership by more than one private individuals
  • Company ownership, where the sharers are shareholders in the company
  • Partnership ownership, where the sharers are partners in the partnership

Whichever method you use, the sharers do not have to own equal shares of an asset.

Similarly there are two routes to a lease or licence agreement:

  • two or more people get together and decide to share an asset. They decide that one person will buy the asset and fractionally rent it to the others. This can apply to any kind of asset, but can also be more suitable for certain assets for practical purposes, particularly if one sharer will be housing/storing the item, or if it is important that someone is clearly responsible for maintaining the asset.
  • one person already owns the asset and one or more people fractionally rent a share of the asset

The combination of type of asset and type of sharing agreement leads to six sharing scenarios each requiring different legal documentation:

  • Fractional ownership or joint ownership of real property – you must employ a solicitor for this
  • Lease of real property
  • Licence of real property
  • Fractional ownership or joint ownership of chattels
  • Lease or licence of chattel
  • Shared use

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