Sharing the Family Cottage

A cottage sharing agreement details agreed-upon guidelines that are used to safely pass cottage ownership and control from one generation to the next. The goal is for the property to stay in the family for years to come.

Inheriting the family cottage is a fairly straightforward move. Most of the problems arise with siblings having joint custody of the property. Planning out cottage succession helps everyone involved create guidelines around things like how they are going to use the home, how to divide up costs and work around the property, and how to resolve potential conflicts. These carefully thought-out rules can help keep the peace. 

It can be broken down into these five categories: money, maintenance, scheduling, conflict resolution, and an inheritance plan. Ideally, all cottage sharing agreements should be made between active parents and their children to avoid any surprises or tension after the will is read. The more complete a cottage sharing agreement is, the better it will serve the family.

Here are the five areas to consider when writing your succession plan. 

Go through the monthly and yearly expenses such as utility bills, municipal taxes, and insurance premiums to create a cottage budget. Will the expenses be spilt equally? What if one sibling isn’t as financially set as another? One way to remedy this is have the sibling contribute with their time, for instance managing the property. They can be responsible for opening and closing the cabin each season, balancing the finances and paying the bills. If carrying costs are too expensive for one family member, a second option is a reduction in ownership – maybe they get less say in maintenance decisions or they only get to use the property a few weeks a year.

Life happens and some families chose to apply a five-year grace period into the succession plan that accounts for financial hardships. You could agree that if after the five years are up and a sibling isn’t helping with the cottage fees, they then give up their share of the property. Having this sort of agreement clearly set out ahead of time helps your family members understand what sort of commitment they are agreeing to and how to deal with difficult issues if they come up. 

Outside of the regular electricity bill, it’s smart to set aside money for unexpected repairs – it’s usually the renovations or upgrades that can put a strain on the co-owners’ relationship. Put together a budget for maintenance work, whether that means contributing to a fund monthly/yearly or tackling the repairs as they come.

There should also be a plan in place for agreeing upon upgrades or renovations to the vacation home. Decision making might involve a simple majority or need a unanimous vote. Is the family willing to take out a loan for repairs? Or should family members have a few years to save up for any major work?

Co-owners who can’t come up with the money may be able to contribute their time or energy by supervising the renovation project or even doing the work themselves. 

It’s likely that everyone wants a chance to soak up the summer sun lakeside. Accommodating everyone could be a challenge. Should all children use the property together or will time be split evenly between siblings? Are guests or non-family relations allowed to use the chalet in certain circumstance? Is there a period that no one can head to the vacation home?

Laying out the cottage rules includes defining what activities are allowed and which are prohibited – ex. pets or smoking. Agreeing on a certain state of cleanliness to leave the cottage in – dishes washed and laundry folded – could prevent future arguments.    

If someone can’t enjoy the property on their allotted days, can they rent it out? If so, should rent profits be split equally or funneled back into the cottage? These are options that should be considered. 

Things will change over the years as you share the cottage. It can help to set up an annual family council meeting to discuss everything related to the property.

There should also be a system in place that ensures verdicts are fair and/or there’s a process to deal with disagreements, whether that’s a collective decision or bringing in a third party like a home inspector to break down what renovations are needed and when. 

A property can be easily split between two siblings, but the inheritance gets more complicated when there are spouses and the siblings’ children involved.

If an heir dies, should the shares be automatically passed on to their children? Or should the cottage be put up for sale?

What happens when a co-owner no longer wants the real estate, should each have a right to sell their share, perhaps giving the others a right of first refusal to buy? Is there an option to find a third party to replace them if the rest of the family doesn’t want to buy them out?

These could be complex scenarios and it’s impossible to predict all of them, but having guidelines that include an exit strategy can make all the difference. 

Creating a cottage sharing agreement can be overwhelming and even the most carefully thought-out cottage agreements won’t prevent the occasional sibling squabble or family friction. Instead, the goal is to diffuse majority of the problems before they become an issue.

Cottage succession planning can involve several experts, including financial advisers, appraisers, and other professionals to get the job done well.

The cottage sharing agreement is a legal contract so it can help to start the process with a lawyer who can identify the issues, provide recommendations and a draft cottage sharing agreement to discuss with your family. Remember that you are doing all this work now to protect your family's happiness in the future and create a safe inheritance path.