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Thinking about buying a vacation house with someone else? Start with a written partnership agreement, said David Deckelbaum, a D.C. settlement lawyer. In real estate, oral agreements are rarely enforceable.
The agreement should spell out:
· Who will occupy the property and when.
· Limits on guests or tenants.
· How operating costs such as utility bills, taxes and insurance will be divided.
· What happens when a partner wants to sell.
"No matter what they decide to do, they should set forth the rules of the game before they begin to play it," Deckelbaum said. That way, "once one or both parties don't want to play the game anymore, the rules are set forth and understood."
Some real estate experts recommend forming a limited liability company, or LLC, especially if the group plans to take in tenants. The LLC becomes the official owner of the house, which protects the group against lawsuits from renters or other entities. Although an LLC can be used to purchase the house, a bank will require each member of the LLC to sign personally for their share of the loan.
